MANILA, Philippines – Zurich-based Credit Suisse has lowered the economic growth forecast of the Philippines together with other countries in the Asia Pacific Region this year and next year as advanced economies led by the US are teetering on the brink of recession.
In a report, Credit Suisse said it has slashed the country’s gross domestic product (GDP) growth forecast to 4.3 percent instead of 4.6 percent this year and to 4.2 percent instead of five percent next year.
The investment bank said there was no major revision in this year’s GDP growth forecast as it did not factor in the impact of the Aquino administration’s public private partnership (PPP) scheme in its original 4.6 percent projection for this year.
“The reason we are not making a large downward adjustment to our 2011 growth forecast is that we were anyway less optimistic about Philippines’ growth compared with consensus. This was partly because we didn’t think that the planned PPP infrastructure projects that many were bullish about were likely to get off the ground in a hurry,” Credit Suisse stressed.
The National Statistical Coordination Board (NSCB) earlier reported that the country’s GDP growth slackened to 3.4 percent in the second quarter of the year from 8.9 percent in the same quarter last year due to the surge in world oil prices, the prolonged weakness of the global economy, the political unrests in the Middle East and North African (MENA) region, and the disasters in Japan.
The GDP growth in the second quarter was also slower than the revised 4.6 percent booked in the first quarter of the year. This brought to four percent the GDP growth in the first half of the year from 8.7 percent in the first semester last year.
In its revised growth forecast, the investment bank sees the country’s GDP expanding by 3.8 percent in the third quarter and by 5.5 percent in the fourth quarter of the year.
Credit Suisse sees the GDP growth slowing down to 3.6 percent in the first quarter of next year before picking up to 4.2 percent in the second, 4.4 percent in the third, and 4.7 percent in the fourth quarter of next year.
“For 2012 the downward revision in growth is larger – while earlier we expected the economy in 2012 to manage to grow at a quarter-on-quarter pace similar to the historical average trend rate, we are now assuming sub-trend sequential increases to reflect likely headwinds to remittances and export growth from the less optimistic global growth scenario,” it added.
The Cabinet-level Development Budget Coordination Committee (DBCC) has set a GDP growth target of between seven percent and eight percent this year from 7.6 percent last year but now expects the GDP to expand by five percent to six percent this year.
The Philippines was on the verge of a recession in 2009 after its GDP growth slackened to 1.1 percent from 3.8 percent in 2008 due to the full impact of the global financial crisis.
However, the slowdown is not unique to the Philippinas as Credit Suisse believes that Asian growth is set to slow more sharply than most expect over coming months as the western world is teetering on the brink of recession.
“Unfortunately there is little to suggest that large parts of Asia remain anything
other than highly susceptible to growth developments in the US and Europe,” it stated.
Except for Indonesia, Credit Suisse has also lowered the GDP growth forecasts of China, Hong Kong, India, Korea, Malaysia, Singapore, Taiwan, and Thailand for this year and next year.
Due to the expected slowdown in growth, the investment bank believes that the Bangko Sentral ng Pilipinas (BSP) would keep interest rates steady until the end of the year after a twin 50 basis point rate hike last March and May to keep inflation expectations well anchored amid escalating oil prices in the world market.
This brought the overnight borrowing rate to 4.50 percent and the overnight lending rate to 6.50 percent. –Lawrence Agcaoili (The Philippine Star)
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