Philippine growth to ease towards 2015 — report

MANILA, Philippines – The Philippine economy will likely fall short of the government’s 7%-8% growth target this year and will expand at an even slower pace towards 2015, an analysis of International Market Assessment (IMA) Asia showed.

In its Asia Forecast Book Q1 2011: Forecasts to 2015 that was distributed to reporters yesterday, IMA Asia, which provides assessments on political, economic and commercial developments to multinationals and industries, said the Philippines’ gross domestic product will likely grow by 6.7% this year. Growth will then slow to 5.6% next year, 5.3% in 2013, 5.6% in 2014 and 6.1% in 2015.

Still, IMA Asia said it raised its projected compounded annual growth rate (CAGR) for the Philippines to 5.9% from 2010-2015 from an original 4.9% estimate for the same period. “This (2010-2015 CAGR) is the fastest trend growth in 40 years,” the report read.

Noting that the 34-year-high 7.3% growth last year was fueled by a surge in fixed investment and strong manufacturing rebound, IMA Asia said strong expansion of consumer demand that was particularly felt last year looks “set to continue through 2012 as global growth strengthens.”

It added that the government will remain a key investment driver this year due to the priority infrastructure projects it is pitching to businesses under public-private partnership arrangements.

At the same time, however, private investments are expected to follow suit, “with greater interest in mining and in commercial and residential construction.”

Among others, “property prices are rising in Manila, which could help fuel a construction boom in 2011,” the report read.

IMA Asia noted further that the strong 34% growth of exports last year, which mirrored the 12.3% rebound of manufacturing, showed that the threat of competition from China that was felt in the last five years “seems to have eased.” “Our trend growth forecast [for manufacturing] of 5% [from 2010] to 2015 may need to be adjusted up toward 7%-9% if this trend is sustained through 2011,” the group said.

Saying “there is no sign of national instability at present,” the report still noted that corruption and red tape remain endemic. “Most foreign firms learn to operate in this environment, although these problems undermine virtually all major projects,” it said.

IMA Asia added that it expected the inflation rate “to double in 2011 due to rising global commodity prices and strong domestic demand.” Inflation averaged 3.8% last year and hit 3.5% in January.

The group projects inflation rate to accelerate to 8% this year against an official 4.4% forecast and 9% next year against a 3.5% forecast, before easing to 7% in 2013, 6% in 2014 and 4% in 2015.

The report provided projections for 13 other economies: Australia, China, Hong Kong, India, Indonesia, Japan, Malaysia, New Zealand, Singapore, South Korea, Taiwan, Thailand and Vietnam. –Business World