THE GOVERNMENT’S 5-6% growth goal for this year will likely be achieved on the back of robust demand and increased spending, a Senate think tank said, notwithstanding challenges posed by continued global volatility.
“[The] outlook for 2012 is relatively sanguine,” the Senate Economic Planning Office (SEPO) said in March report, noting that underspending had resulted in 2011’s lower-than-expected 3.7% growth.
Officials of global banking giant Citigroup, Inc. shared the economic optimism, yesterday saying a pickup in state spending and increased investments under the public-private partnership initiative could boost Philippine growth.
“[W]ith all the positive news coming through in terms of exports, government spending being front-ended this year and investments coming in, there could be a positive [change] to the numbers that have been projected,” Citi country officer Sanjiv Vohra told reporters yesterday.
In its Global Economic Outlook and Strategy report released earlier this month, Citi said it expected the economy to grow by 4.2% this year and 4.5% next year. The 2012 forecast is within the government’s 5-6% target.
Citibank N.A. CEO Eugene McQuade, visiting the country on the occasion of Citigroup’s 200th anniversary, said the Philippines remained one of the “key markets” in the region.
“The Philippines need some infrastructure improvement over time, we are looking at those and studying how we may participate. Power and energy, roads and transportation are some of the sectors we are looking at,” Mr. McQuade said.
The SEPO, meanwhile, said consumer demand would be sustained by “continuous inflow of remittances” as well as “spending for election in 2013”, while “public spending is seen to be fast tracked” with the early release of department budgets.
“[P]rivate construction, particularly in the property subsector, is anticipated to remain robust given the upward momentum in office demand and investments in low-cost housing,” the think-tank added.
It warned that downside risks were still present, highlighting the need for increased government spending on infrastructure and social services.
The SEPO said “the economic turmoil in Europe can cause difficulties in restoring market confidence” and could result in “a global credit crunch.”
“Although the situation is kept in check for the moment, an actuality may bring a much broader and longer recession than 2008-2009,” it added.
The SEPO said oil price volatility due to tensions in the Middle East could also stoke inflation. “The government should continue to be mindful of the fragile external environment,” it said, “social safety nets and infrastructure programs must be prioritized to ensure long-term growth.”
For Citi, Mr. Vohra said the bank had a good start this year and would continue to focus on boosting its consumer and transactional banking businesses along with deals with top-tier corporates.
“2012 has started on a very strong note with our participation in three landmark transactions, which are the sale of the government’s $1.5 billion dollar-denominated notes, issuance of [International Container Terminal Services, Inc.’s] $200 million securities and [SM Investments Corp.’s] $250 million convertible bond offering,” he said.
He said the bank had a “very strong pipeline” moving on to the second quarter, in particular noting that Citi is involved in the sale of Bank of Commerce’s stake to CIMB Group Holdings Bhd.
“We hope to close the transaction in the second quarter,” Mr. Vohra said. — with a report from A. S. O. Alegado, Businessworld
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