Moody’s sees Phl growth accelerating to 5% next year

MANILA, Philippines – New York-based Moody’s Investors Service sees the Philippine economy expanding by five percent next year from about 4.5 percent on the back of strong remittances from overseas Filipino workers as well as higher government spending arising from the Aquino administration’s public private partnership (PPP) program.

Moody’s analyst Simon Chen said in a report that higher OFW remittances and robust domestic spending would help the Philippines survive external conditions that is not expected to improve over the next 12 to 18 months as the current debt crisis in Europe continues to cloud the outlook for the global economy.

“In the coming 12 to 18 months, we expect economic conditions to remain fairly robust, though the pace of growth will moderate due to stronger global headwinds. Our central scenario is for real GDP to grow 4.5 percent in 2011 and five percent in 2012, a slowdown from growth of 7.6 percent in 2010,” Chen stressed.

Latest data from the National Statistical Coordination Board (NSCB) showed that the country’s domestic output eased to 3.2 percent in the third quarter of the year from 7.3 percent in the same quarter last year bringing the average gross domestic product (GDP) growth in the first nine months of the year to 3.6 percent.

The Cabinet-level Development Budget Coordination Committee (DBCC) has revised downwards the projected GDP growth to 4.5 percent-5.5 percent instead of the revised five percent to six percent. Originally, the DBCC projected a GDP growth of seven percent to eight percent for this year.

For 2012, the DBCC sees the country’s GDP expanding between five percent and six percent. The country’s GDP growth zoomed to its fastest level in 34 years after expanding by 7.6 percent last year.

Chen said OFW remittances that account for more than 10 percent of GDP would continue to be a strong driver of household consumption that make up for more than 70 percent of GDP.

“While export weakness may persist, GDP growth for the Philippines has been led by services output and household consumption. One unique feature of the economy is the high level of foreign income injections — through overseas worker remittances,” he explained.

He added that domestic spending would stay robust and make up for weaker contribution from exports next year as remittances would remain strong.

The analyst pointed out that the take off of the Aquino government’s PPP program including its P72 billion economic stimulus package announced last Oct. 12 to finance infrastructure and poverty alleviation projects.

“Another potential uplift for the economy comes from the government’s pump priming. This includes the P72 billion economic stimulus package to finance infrastructure and poverty alleviation projects, as well as the proposed acceleration in approvals of PPP projects,” he said. –Lawrence Agcaoili (The Philippine Star)