...the growth projection

Philippines’ growth seen to pick up in 2012

GDP expansion forecasts range from 3.6% to 4.5%

By: Doris C. Dumlao, Michelle V. Remo
Philippine Daily Inquirer

Wednesday, February 1st, 2012

Workers check the reinforcing bars at a construction site in Makati, the financial district of Manila on Monday, January 30, 2012. The Philippine economy is expected to grow at a faster pace this year than in 2011, when it posted a "feeble" 3.7 percent growth. AFP PHOTO/NOEL CELIS

The Philippine economy will likely grow at a faster pace this 2012 from last year’s anemic performance as the government’s pump-priming could add to the momentum from private consumption and prospective export recovery, according to New York-based think tank Global Source.

In a report titled “Nowhere to Go but Up?” written by Filipino economists Romeo Bernardo and Margarita Gonzales, Global Source said a 4.5-percent gross domestic product growth for this year remained achievable, “where surprises may even be on the upside.” The commentary was issued after the government’s announcement on Monday of a 3.7-percent full-year 2011 GDP growth.

JP Morgan Chase & Co. agreed that with the help of a low interest rate environment, the Philippines would likely achieve a faster economic growth this year, possibly within the 4-percent territory.

HSBC economist Trinh Nguyen added that while the government would likely “do what it can to boost growth,” the Philippine economy would expand by only 3.6 percent this year.

All the growth forecasts fall short of the Aquino administration’s official target of between 5 and 6 percent.

The Global Source report also predicted that the Bangko Sentral ng Pilipinas might sanction another 25-basis-point policy rate cut before the year ends “while the inflation outlook remains benign and before a growth pickup is fully established.”

JP Morgan Chase also expected the BSP to cut by end-March the key policy rates by another 25 points to again hit the record lows, saying the monetary agency would likely take advantage of the low-inflation environment.

But HSBC’s Nguyen, despite her slower growth outlook, no longer expected the BSP to cut key interest rates further after the quarter-point reduction in January.

“Exports are unlikely to recover in 2012, but acceleration of government consumption growth should continue supporting growth throughout this year,” Nguyen said. “The BSP supported growth by cutting interest rates by 25 [basis points] in January 2012. However, ample liquidity and robust domestic demand conditions means further cuts are unlikely.”

Global Source said that apart from base effects, there seemed to be some momentum coming from private consumption, which still grew a robust 6.7 percent annually in the fourth quarter of 2011, likewise up 1.6 percent quarter on quarter on a seasonally adjusted basis.

The think tank added that the peso depreciation during the period likely enhanced the purchasing power of remittances, which had been growing quite robustly (by about 7 percent) while compensation of overseas workers as recorded under net primary income rose 3.6 percent after dipping annually for three consecutive quarters.

“We also anticipate some recovery in merchandise exports as firms in the electronics and semiconductor industry have started to note an increase in orders that could bring volumes back up to 2010 levels,” the Global Source research said. This would translate easily to double-digit growth which, while seemingly impressive, actually comprises one-offs – such as a rebound in production from supply disruptions tracing to Japan’s tsunami and nuclear crisis and massive Thai floods,” the think tank said.

“Because of the country’s cost advantages, we believe services exports, which grew by 18.5 percent in the fourth quarter last year, will likely remain strong despite threats of a clampdown on the outsourcing sector by the current US government,” the research said.