S&P forecasts 1-1.5% growth for RP this year

MANILA, Philippines – The Philippine economy is expected to expand anywhere between one percent and 1.5 percent this year, according to the latest forecast of international credit rating agency Standard & Poor’s (S&P).

In its Asia Pacific Mid-Year Outlook report, S&P revised its gross domestic product (GDP) forecast to a range of one percent to 1.5 percent from 0.5 percent to one percent previously.

S&P’s revised economic growth projection is within the government’s target growth range of 0.8 percent to 1.8 percent.

The global debt watcher said that while some countries in the Asia Pacific region will experience contraction this year, the Philippines and some of its neighbors are already on the road to recovery.

S&P said that China, India, Indonesia, Vietnam are expected to post economic growth this year, with China seen to lead economic recovery with a GDP growth range of 7.5 percent to eight percent.

“Domestic policy responses, both monetary and fiscal, appear to have played a significant role in shoring up domestic demand in an environment in which exports — so crucial to many of these economies — were performing so disastrously,” it said in its report.

Nine countries such as Japan, Singapore, Korea, Taiwan, Malaysia, Thailand, Australia, New Zealand and Hong Kong are likely to record economic contractions, S&P also said.

By next year, however, S&P said many of these economies would recover.

It expects the Philippines to expand from 3.3 percent to 3.8 percent in 2010, better than the official forecast of 2.6 percent to 3.6 percent.

However, S&P also noted that along with the recovery of the global economy, inflation could also rise as demand for goods and services shoots up.

This early, global oil prices are already on the rise, affecting local pump prices.

In the first quarter of the year, the economy expanded by only 0.4 percent compared to the 3.9 percent recorded a year ago.

The government expects second quarter GDP to fall anywhere from -0.1 percent to 0.9 percent.

The Bangko Sentral ng Pilipinas (BSP) expects the Philippine economy to have grown by at least one percent in the second quarter of the year and that a contraction during the period, as the National Economic and Development Authority (NEDA) said could be possible, is out of the picture.

A ranking BSP official said dollar remittances from overseas Filipinos which continue to be robust and the improving external development helped boost economic growth from April to June.

The official said the “internal projection of the BSP” is that gross domestic product (GDP) could have grown by at least one percent in the second quarter of the year, better than the 0.4-percent growth registered in the first three months.

Dennis Arroyo, NEDA director for national policy and planning staff, said last week that GDP in the second quarter could have performed anywhere from -0.1 percent to 0.9 percent.

Arroyo pointed out most sectors weakened compared to last year except for the construction, mining and quarrying and finance sub-sectors.

“The forecast is based on the latest indicators such as agricultural performance, exports and imports figures, MISSI (monthly integrated survey of selected industries), consumer goods sales, corporate profits, overseas Filipinos remittances and other relevant data and information that have impacted on the second quarter performance of the economy,” Arroyo said.

The National Statistical Coordination Board (NSCB) is set to release the second quarter figures on Aug.27.

If the economy hits the lower end of the government’s forecast, it would be the first time the country’s output shrank in more than ten years.

With the -0.1 percent to 0.9 percent GDP forecast for the second quarter, Arroyo said the agriculture, fishery and forestry sectors may have grown from 0.4 percent to 1.4 percent, the industry sector, from -2.9 percent to -1.3 percent and the service sector from 1.7 percent to 2.2 percent during the period.

The Development Budget Coordination Committee (DBCC), the interagency group that sets the country’s macroeconomic assumptions, expects the economy to grow anywhere from 0.8 percent to 1.8 percent this year, revised downward from the previous projection of 3.1 percent to 4.1 percent. –Iris C. Gonzales (The Philippine Star)