MANILA, Philippines – The Bangko Sentral ng Pilipinas (BSP) believes that strong domestic demand would give the Philippines enough internal buffer to survive the impact of the recent downgrade of the triple A credit rating of the US by Standard & Poor’s as well as the ongoing debt concerns in Europe.
BSP Assistant Governor Ma. Cyd Tuano-Amador said in an interview with reporters that robust domestic demand would continue to be the main driver of economic growth for the Philippines.
“The underying forces for domestic demand would be the main driver for growth. This internal buffer should enable us to ride through this very rough waters,” Tuano-Amador stressed.
Economic managers through the Development Budget Coordination Committee (DBCC) has penned a gross domestic product (GDP) growth of between seven percent and eight percent this year.
She pointed out that the results of the BSP’s 3rd Quarter Business Expectations Survey (BES) point to a better economic growth prospects for the Philippines in the second half of the year.
Directionally, Tuano-Amador said, respondents believe that growth would continue to be favorable and buoyant for the second half at least according to the BES and the predictive ability of past surveys to track the growth prospect of the economy in the near term
“One way to answer that is to look at the predictive ability of the BES against the actual results of the GDP. It is not a very good fit but the fit is quite reasonable and respectable. So if the confidence indices for both the third quarters and fourth quarters are trending up, then we also expect the trend growth for the second half of the year to be also quite favorable also,” she aded
She explained that the bulk of the responses of the survey that was conducted by the BSP from July 1 to August 17 were received late July and the events that transpired in early August including the decision of S&P to downgrade the triple A credit rating of the US to AA+ were not taken into consideration.
Businessmen turned more optimistic in the third quarter of the year after the business optimism index fell for two straight quarters under the Aquino government as the domestic economy is expected to remain resilient despite the recent downgrade in the triple A credit rating of the US as well as ongoing debt concerns in Europe.
After falling to 47.5 percent in the first quarter and 31.8 percent in the second quarter from a record high of 50.6 percent, the recent survey showed that the business confidence index improved to 34.1 percent for the current quarter and 53.9 percent for the next quarter.
This is the first quarter-on-quarter uptick in sentiment after two consecutive periods of decline in confidence readings since the fourth quarter of 2010.
The confidence index is computed as the percentage of firms that answered in the affirmative less the percentage of firms that answered in the negative with respective to their views on a given indicator. A positive confidence index indicates a favorable view.
The country’s GDP growth slackened to 4.9 percent in the first quarter of the year from the revised 8.4 percent in the same quarter last year due to heavy government underspending and weak global trade.
Socioeconomic Planning secretary Cayetano Paderanga Jr. said the other day that the country’s GDP likely grew between 4.5 percent and 5.5 percent for the second quarter of the year on the back of stronger farm output dampening the lackluster performance in the industry and services sectors.
“Based on available data, the economic growth as measured by GDP or the value of goods and services produced within the country, may have reached between 4.5 and 5.5 percent in the second quarter of 2011,” Paderanga said.
The National Economic and Development Authority (NEDA) is scheduled to release the second quarter national income accounts on August 31.
The Philippines posted its strongest economic growth in 34 years after its GDP expanded by 7.6 percent last year exceeding the revised growth target of five to six percent set by the DBCC. The country was on the verge of a recession after its GDP growth plunged to 1.1 percent in 2009 from 3.8 percent in 2008 due to the full impact of the global financial crisis.
Palace hails BSP survey results
Malacañang welcomed yesterday the latest results of the Bangko Sentral ng Pilipinas (BSP) survey showing an improved business confidence index despite the recent US credit rating downgrade and the ongoing debt concerns in Europe.
In a statement, Presidential Spokesman Edwin Lacierda said the government was encouraged by the results of the third quarter Business Expectations Survey of the BSP showing a 34.1 percent increase in business confidence in the current quarter and a 53.9 percent increase in the next quarter.
“The increased optimism displayed by businesses is a sign of confidence in the Aquino administration and in the renewed vitality of the Philippine economy, which puts us on the path of surmounting the challenges posed by recent events that indicate economic instability in Europe and in the US,” he said.
Lacierda said the results of the BSP survey showed that the “vigor of an economy is as much dependent on the optimism displayed by businesses, as it is on fundamentals and sound economic policies.”
“We want to build on this optimism; and in the next few years, our administration will continue to expand the reforms we have already instituted and the firm foundations we have put in place to realize the administration’s vision of sustainable and equitable economic growth,” he said.
The higher business optimism is based on expectations that the domestic economy will remain resilient despite the recent US credit rating downgrade and the ongoing debt concerns in Europe, according to the BSP. – Aurea Calica, Lawrence Agcaoili (The Philippine Star)
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