Growth may slow to 1%

Another global recession could cut gross domestic product growth in the Philippines to 1 percent in 2012, similar to its economic performance in 2009, the World Bank warned Tuesday.

The World Bank, in its Philippines Quarterly Update, said given significant downside risks, another world recession could not be ruled out.

“Global growth in 2012 could mimic the 2009 recession and recovery could be much slower with possibly a mild recession in 2013 and modest growth in 2014,” the bank said, assuming a low base scenario.

“For the Philippines, growth could fall to around 1 percent similar to 2009. Significant contraction in private and external demand can be cushioned by a large enough fiscal stimulus equivalent to around 1 to 1.5 percent of GDP [as was the case in 2009],” it said.

However, the fiscal stimulus and a possible postponement of tax policy reform given the uncertainties would lead to a higher deficit above 3 percent of the GDP in 2012 before gradually declining toward 2 percent of the GDP beginning 2013.

“While the temporary surge in deficit is broadly sustainable, efforts to raise revenues, especially from excise taxes, are very much needed to ensure adequacy of future fiscal space in the event that a prolonged global slowdown requires further expansionary policy,” it said.

Without a world recession, the Philippines is now seen to grow by 3.7 percent this year and 4.2 percent in 2012, lower than the bank’s November forecast of 4.2 percent in 2011 and 4.8 percent in 2012.

The Philippines Quarterly Update provides an update on key economic and social developments, and policies over the past three months.

Meanwhile, Hongkong and Shanghai Banking Corp. sees growth in the Philippines tapering off to 3.6 percent both in 2011 and 2012.

HSBC said the Asean-5, which groups Indonesia, Malaysia, the Philippines, Thailand, and Vietnam, had not escaped the global economic jitters.

“Apart from portfolio outflows, rising market volatility and widening risk premiums, exports are cooling off. Although accommodative monetary policy and solid domestic growth are providing support, this has not kept us from lowering our growth forecasts,” the British bank said.

Inflation rate in the Philippines is seen at 4.5 percent in 2011 and 4.3 percent in 2012, according to HSBC. –Roderick T. dela Cruz, Manila standard Today