Barclays Capital says RP to grow 3% in 2009

MANILA, Philippines – The economy, as measured by gross domestic product (GDP) may grow by just three percent this year from 4.6 percent in 2008, according to the latest study on the Philippines by Barclays Capital.

Barclays said that apart from weaker exports, the Philippines also faces the problem of declining dollar remittances from overseas Filipino workers.

“These inflows declined during the last two global downturns, falling 11 percent in 1998 and 0.3 percent in 2001. The extent of the current slowdown in global demand leads us to project a five percent decline in remittances this year,” Barclays said.

As a consequence, Barclays said consumer spending is also expected to slow down given how strongly remittances have fuelled spending.

Barclays’ GDP projection is slower than the government’s revised forecast of 3.7 percent to 4.4 percent for 2009.

The latest GDP growth assumption for the year is a downward revision from the previous GDP growth forecast range of 3.7 percent to 4.7 percent for the year.

The government’s revised projection also took into account the contraction in exports and a slowdown in dollar remittances from overseas Filipino workers (OFWs).

“Aside from contraction in exports, other factors threaten to depress GDP growth. These include returning laid-off OFWs which may increase unemployment, a slowdown in remittances, lower revenue collection, a weaker exchange rate and tighter credit markets. Changing weather patterns are shifting cropping seasons, and this may also impact on our farmers,” Socioeconomic Planning Secretary Ralph Recto has said.

Last year, the Philippine economy expanded by 4.6 percent from 2007’s 7.1 percent, its highest in three decades. The agriculture sector grew 3.2 percent last year and this is expected to improve by three percent to 3.6 percent. Services is also seen to take a hit as its growth forecast is between 3.8 percent and 4.5 percent from last year’s 4.9 percent.- Iris C. Gonzales, Philippine Star