Recession unlikely for RP

New York based think tank Global Source said that the Philippines would likely avoid a recession this year but would have a snail’s pace growth through next year.

Deputy Director General Rolando Tumpalan of the National Economic and Development Authority (NEDA) reported this on Tuesday, during the weekly Cabinet meeting held in Bukidnon province in southern Mindanao.

Last week, the World Bank made a similar forecast.

Global Source predicted that the domestic economy would grow by 0.5 percent to 1 percent this year, revising its previous forecast of a 2.5-percent growth. This new forecast is slightly more bearish than the government’s latest official gross domestic product (GDP) forecast expansion of 0.8 percent to 1.8 percent. GDP is the total value of goods and services produced in a country in a year.

The market’s consensus forecast on Philippine GDP growth for this year has gone down to 1.2 percent from the 2.3-percent consensus before the meager first-quarter growth of 0.4 percent was announced.

In ruling out the possibility of an economic contraction, Global Source pointed out that remittances so far managed to hold steady, which meant that any decline in 2009 would be minimal, while export and import numbers slowly evened out, improving the trade balance.

It said that the effects of higher fiscal spending might soon start to become perceptible especially as elections near, while expectations of a global recovery should help revitalize consumers somewhat later in the year.

Impact of recovery

But looking ahead, it added that an upturn in the world economy, especially a weak one, might not mean much for the Philippines.

Coupled with likely weak recovery in advanced economies, Global Source sees only a 3-percent to 3.5-percent GDP growth in 2010.

It noted that the spread of swine flu might be another dampener to economic activity, particularly for tourism-related sectors and businesses dependent on people coming out and converging such as in malls, hotels and restaurants.

But Global Source said that exports might have bottomed out for the year, suggesting that external trade could even out further while the decline in manufacturing could slow.

“Services exports, especially of the business process outsourcing [BPO] sector, will remain strong, according to industry insiders we have talked to, likely growing at double-digit rates. Government spending, which had been delayed by the late signing of the national budget and allegedly held back for reasons of political strategy, may begin to reflect in the national accounts beginning the second quarter of 2009,” the think tank added.

Tumpalan said that while there was progress in the economic recovery plan, having passed the midpoint of the year, the government cannot be complacent and must end up strongly by working double time in infrastructure so as to be ready for the coming rebound in the global economy.

NEDA recommended that there was a need for the Philippines to engage China for more trade, investment and tourism as China continues to post strong growth.

It also recommended that the government must determine what can be learned or replicated from India’s plan to be slum-free in five years as well as rigorously promote the country leadership in “green” building standards and architecture and promote the development of price-competitive sources of alternative energy. –Angelo S. Samonte, Reporter, Manila Times