RP to avoid recession this year

French bank forecast

MANILA, Philippines—Paris-based investment bank Calyon sees the Philippine economy growing by only 1 percent this year but avoiding the recession seen in most of its neighboring economies.

In an economic report dated June 29, Calyon economist Sebastien Barbe said “green shoots” have blossomed in emerging markets over the past few months, particularly in Asia, which meant that private flows could rebound next year.

“However, improved access to financing may not be enough to return growth to a strong level. At some point green shoots may lack fertilizer,” Barbe said, noting that Calyon’s outlook for the world’s three largest economies–US, Japan and the Euro zone–was below market consensus.

In Asia, he projected that growth in gross domestic product in the Philippines would falter from last year’s 4.6 percent to 1 percent, before picking up to 3 percent next year.

But this outlook was better than the contraction projected in Korea (-5 percent), Malaysia (-2 percent), Singapore (-8 percent), Taiwan (-6 percent) and Thailand (-3 percent).

Calyon is more upbeat on prospects in China and India, which were projected to grow by 7.5 percent and 6 percent, respectively, this year. Within Southeast Asia, Indonesia and Vietnam were seen growing the fastest this year at 3 percent and 2.5 percent, respectively.

Given pressures on foreign exchange flows amid a global downturn, Calyon also projected a decline in the Philippines’ current account surplus this year to 0.5 percent of GDP from the previous year’s 1.5 percent of GDP.

“Emerging markets have bottomed out. Beyond a possible rebound in market volatility, capital flows should continue to come back into 2010. However, a tepid recovery in the G3 implies a mixed outlook for emerging market exports and GDP growth,” Barbe said.

A slow G3 performance, he said, would translate into weak exports and deprive emerging markets of what was a major source of growth for many of them before the crisis. “This is actually the main reason why our 2010 emerging market growth forecasts stand significantly below trend growth for most,” he said. –Doris C. Dumlao, Philippine Daily Inquirer