"As the economy continues to absorb the spillover of the effects of peso depreciation and high cost of doing business on the level of economic activity, steel demand this year is expected to contract further, albeit at a slower rate than last year's decline," he said. "The decline is largely attributed to the impact of the region-wide currency crisis on the country's financial stability as well as (an) investment climate which turned almost everyone to a wait-and-see attitude."

The Philippines peso (PHP) is quoted at 40.10 to the dollar, down from PHP26.38 a year ago.

From the hefty 4.3million metric tons recorded in 1996, the demand for steel in the Philippines fell to 3.8 million tons in 1997. Albano forecast 1998 steel demand will fall further to 3.5 million tons.

Albano attributed this to the country's dependence on imported steel products, a result of the country's tariff liberalization program on steel, and slack construction, appliance and automotive industries.

"With the forex rate decline, imported inputs suddenly became more expensive, causing a slowdown in the manufacturing activity... the soaring cost of money (also) caused the deferment of substantial capital appropriations on many proposed and even some on-going construction projects," he said.

The construction industry has been particularly badly hit by the currency crisis. After enjoying a boom in 1996, the construction industry suddenly slipped in mid-1997. Albano noted that, in terms of floor area, the construction sector's growth rate declined to 5.3 per cent in 1997, down sharply from 1996's 27 per cent.

Theeconomic slowdown has also forced consumers to forego the buying of non-essentials like cars and households appliances. Albano said that in 1997, vehicle sales totaled 144,373 units, down 11% from 162,095 units in 1996. He claimed that sales will further shrink by 24 per cent to 109,000 units in 1998.

Likewise, Albano disclosed that sales of major appliances dropped by 23 per cent to 336,473 units in February from 433,334 units reported last year.

But Albano is optimistic that by 1999, the local demand for steel will perk up. Claiming that the consumption slowdown is just "postponed demand rather than foregone demand," he said that steel consumption will increase to 5.4 million tons next year. The demand will continuously grow until the year 2005.

Albano said that the expected burgeoning consumption rate will be fueled by the government's infrastructure and housing programs; the build-operate-transfer schemes which serve as incentives to the private sector to engage in infrastructure projects; and thegrowing popularity of steel as an ecologically-viable alternative construction items to lumber and wood-based products.