Steady recovery seen for RP, SEA

MANILA, Philippines – Countries in the Southeast Asian region, including the Philippines, are expected to post steady recovery in the latter part of 2009 and in 2010 if governments continue to put in place fiscal and monetary support, Standard & Poor’s said in its latest report on the region.

“While it is clear than the region’s economic downturn has bottomed out, a too-early withdrawal of fiscal or monetary support could jolt the steady pace of recovery,” the global debt watcher warned.

S&P said Southeast Asian countries including the Philippines need to offset slow external demand by “creating enough domestic demand for local goods.”

It urged members of the Association of Southeast Asian Nations (ASEAN) to maintain trade with each other, noting that “intra-regional trade will remain central to revival.”

On the monetary side, S&P expects the Bangko Sentral ng Pilipinas (BSP) to hold off any rate cuts in the near future, following the 200 basis points cut in key policy rates it implemented since December 2008. 

Last Aug. 20, the BSP’s Monetary Board took a widely expected pause in its monetary easing and left key policy rates unchanged at four percent for the overnight borrowing rate or reverse repurchase facility and six percent for the overnight lending rate or repurchase facility.

On the fiscal side, S&P recognized that the Philippines, as with Indonesia, introduced measures for pump-priming their economies. It agreed that the government’s budget gap could hit P250 billion this year, or 3.2 percent of GDP because of the fiscal stimulus program.

“Where  Indonesia’s stimulus (January 2009) was worth $6.1 billion (1.2 percent of gross domestic product), the Philippines’ was worth $6.5 billion (4.6 percent of GDP). As a result, the Philippines had to abandon its balanced budget commitment and will likely see a fiscal deficit of 3.2 percent of GDP in 2009 — up from 0.9 percent in 2008,” S&P said.

The interagency Development Budget Coordination Committee (DBCC), the group that sets the country’s macroeconomic assumptions, has revised the budget deficit ceiling for 2009 to P250 billion from P199 billion or 2.5 percent of GDP on account of the government’s pump-priming efforts.

From January to August, the deficit had already hit P210 billion, only P40 billion shy of the P250 billion ceiling and almost seven times more than the P31.7 billion deficit recorded in the same period last year. –Iris C. Gonzales (The Philippine Star)