London’s EIU sees 3% growth in ’10

An international think tank sees the Philippine economy growing 3 percent in 2010, from a 1.8-percent contraction this year when the country suffered from the impact of drastic drop in global trade.

“Aggregate demand will begin to recover in 2010, but GDP growth will be weak, at 3 percent,” the London-based Economist Intelligence Unit said in its July 2009 regional forecast for Asia.

It said the most serious risks to its outlook stemmed from the global financial crisis, as the deterioration in financial markets would lead to more drastic reductions in bank lending in developed economies, resulting in greater disruption to the global economy.

“Private consumption, which has been supported by remittances from expatriate Filipino workers, could be weaker than forecast if developed economies experience deeper recessions than we currently expect,” it added.

It said more severe recessions in the developed world would hurt exports depress demand for the Philippines’ most important export category, electronic goods.

“Our forecast also assumes that the Philippines will avoid external financing difficulties and that its banks will remain willing to lend,” the group said.

The EIU said the global economic recession had hit economic growth in the Philippines this year when it expects the GDP to shrink for the first time in 10 years, with real GDP falling by 1.8 percent in 2009.

Exports of goods and services are also seen to decline by 15.7 percent owing to weaker global demand. Gross fixed capital investment is forecast to contract for the first time since 2005, as investor confidence has collapsed and financing conditions have tightened.

“Even where capital is available, firms have become reluctant to begin new projects in such an uncertain economic environment. Weaker external demand and domestic investment will lead to higher unemployment and will depress consumption growth,” it said. –Roderick T. dela Cruz, Manila Standard Today