Tokyo-based investment bank Nomura International Limited has lowered its gross domestic project (GDP) growth projection for the Philippines this year to 2.8 percent from three percent previously, due to the global financial turmoil.
Nomura’s economic growth projection is significantly below the government’s official projection for 2009 of 3.7 percent to 4.7 percent.
The bank said that the country’s economic growth would be largely influenced by slowing demand for exports.
Nomura said exports are expected to slow further through the first half of 2009 due to slow demand from markets across the globe led by the United States which is the country’s major trading partner.
“We look for exports to slow further through the first half of 2009 given increasing downward pressure on the economies of Asia, particularly China, the euro area and the United States,” Nomura said.
On the monetary side, Nomura expects the Bangko Sentral ng Pilipinas (BSP) to cut its overnight borrowing rate by 100 basis points by March 2009 to support the economy.
The central bank’s overnight borrowing rate is currently at 5.5 percent while the overnight lending rate is currently at 7.5 percent.
As for the peso, Nomura said the currency is expected to be susceptible to downward pressure through the first half of 2009 as global financial markets remain turbulent.
“However, we expect the currency to stabilize against the dollar in the second half of 2009 as we think pressure from outflows related to portfolio investment should ease while declining crude prices and rising remittances from overseas workers should more than counter depressed exports, resulting in a widening current account surplus in 2009,” Nomura said.
Nomura expects the peso to settle at 48.50 against the dollar this year, slightly higher than the government’s official forecast range for the peso of 45 to 48 against the greenback.
The government for its part is still sticking to its GDP forecast of 3.7 percent to 4.7 percent for the year.
Socioeconomic Planning Secretary Ralph Recto said the target is “still a fighting target.”
Recto said the government only needs to pump-prime the economy by spending a large part of the budget in the first half of the year. Aside from the budget, Recto said the government and the private sector could also tap the P300-billion crisis fund earlier proposed by President Arroyo.
The government and the private sector have agreed to work together to raise the P300 billion which could be lent to businesses.–Iris C. Gonzales, Philippine Star
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