ADB sees slower growth

Remittances may not be as ‘robust’ – bank
 
The Philippine economic growth forecast was most likely to be revised downward this year because of the expected drop in remittances from overseas Filipino workers (OFWs), Asian Development Bank said.

In its Asia Economic Monitor 2009, the Manila-based lender kept the country’s economic growth forecast this year to 2.5 percent and 3.5 percent in 2010.

“The 2009 growth forecast of 2.5 percent for the Philippines has downside risks, as remittances from Filipinos working overseas may not stay robust,” ADB said.

From January to May, remittances reached $6.98 billion, or a 2.8-percent increase from the level recorded during the same period last year.

In May alone, money sent home to the Philippines through banks grew by 3.7 percent to $1.48 billion.

The World Bank earlier estimated that remittance flows to developing countries were projected to contract by 7.3 percent to $304 billion, lower than an estimate of $328 billion last year.

In East Asia and the Pacific, remittances were likely to fall by 5.7 percent to $74 billion this year.

The Washington-based lender blamed the gloomy remittance projection on the US economic and construction sector slowdown, unfavorable foreign exchange rate, as well as rising protectionism in destination countries.

Government forecast

The Philippine government’s Development Budget and Coordinating Committee (DBCC) projects the economy as measured by gross domestic product (GDP) to expand between 0.8 percent and 1.8 percent from the earlier forecast of 3.1 percent to 4.1 percent.

In 2010, the agency projected a GDP of between 2.6 percent and 3.6 percent.

An economic indicator, GDP is the amount of final goods and services produced in a country in a year.

Despite the economic crunch, the ADB said that the Philippines managed to post a minimal GDP growth by 0.4 percent in the first quarter of the year, unlike other countries in the region that recorded economic contraction.

It added that the global downturn also affected growth in Indonesia.

But the ADB said that with both countries less reliant on exports than many of their emerging East Asian neighbors, their respective slowdowns were not as dramatic.

“Economic activity among Asean—four countries [Indonesia, Malaysia, the Philippines and Thailand] should start to strengthen from the second half of 2009. Indonesia and the Philippines, which are both less reliant on exports, managed to maintain some positive growth during the worst of the global downturn,” it added.

Asean—the Association of Southeast Asian Nations—also groups Brunei, Cambodia, Laos, Myanmar, Singapore and Vietnam.

Faster growth

Earlier, Ralph Recto, Socioeconomic Planning secretary and National Economic and Development Authority director general, said that the country’s GDP grew faster than the 0.4-percent uptick seen in the first quarter.

“Definitely, it [the second quarter showed] positive growth. GDP [in the second quarter] should be better than [that of the] first quarter,” he added.

Recto attributed his bullish outlook on robust consumer spending and higher revenue collections by the Bureau of Internal Revenue.

Bangko Sentral ng Pilipinas had said that GDP could grow higher in the second quarter depending on actual public spending.

The Manila Times earlier reported that only a third of the P94.71-billion budget for infrastructure projects was disbursed by four key agencies told to do so.

Malacañang had ordered the four agencies to spend 60 percent to 80 percent of the productive portion of their allocation in the first half of the year, with particular focus on infrastructure.

The planned frontloading and spending for the first half was meant to boost private sector confidence in the economy, after growth in the first quarter sharply fell from 3.9 percent the year before.

Those that were told to frontload were the Public Works, Transportation, Agriculture and Education departments.

Asian recovery

Asian economies would likely bounce back from the global economic slump in 2010 but fears remain over the sustainability of growth if there is no wider recovery, ADB said on Thursday.

The bank’s chief economist, Lee Jong-Wha, said that the outlook for East Asia this year remained “pessimistic,” but ADB foresaw a V-shaped recovery led by China if countries continue to focus on stimulating domestic demand.

“We are optimistic for developing Asia for a V-shape recovery . . . But the big question is whether it will be sustainable growth—in that part we are rather pessimistic without a full global recovery,” Lee said ahead of the launch of ADB’s biannual Asia Economic Monitor in Bangkok.

“It will be very difficult to return to the pre-crisis trend of growth,” he added.

Despite an increasing proportion of export demand coming from within Asia, notably China, countries in the region continue to rely on markets in the US, European Union and Japan for 60 percent of final goods exports, Lee said.

Those markets are less likely to recover from the global financial crisis so quickly, he added.

The ADB report recommended a continued focus on loose monetary and fiscal policies to stimulate domestic demand, with support for small enterprises and stimulus packages that must be fast and efficient.

“The issue is how effectively they [Asian governments] can mobilize these additional fiscal resources,” Lee said.

The report showed that the pace of capital outflows from Asia had slowed in the first quarter of 2009, and Lee urged large Asian investors to focus more of their capital spending within the region.

While China’s recovery has “gained traction” and the more closed smaller economies such as Indonesia are on course to stronger growth levels, he said that concern remained for more export-dependent small regional economies such as Hong Kong, Malaysia, Singapore and Thailand.

ADB earlier this month said that it would update on September 22 its flagship Asian Development Outlook forecasts, which predicted earlier this year that developing Asia will see its economic growth fall to 3.4 percent this year compared with 6.3 percent in 2008. — Darwin G. Amojelar, Senior Reporter
with Reports From AFP, Manila Times