Citi sees Philippine ’09 growth at 2.7%
Philippine Daily Inquirer
American banking giant Citigroup expects the Philippine economy to grow at a slow 2.7 percent pace next year as an imminent global recession curbs exports and overseas remittance inflows.
The government’s target is 3.7-4.7 percent as recently approved by the inter-agency Development Budget Coordination Committee.
“We think the downside would depend largely on the slack that is likely to come from a narrower contribution of net exports to gross domestic product (GDP),” Citigroup’s economist for the Philippines, Jun Trinidad, said in a recent commentary.
“A drop in exports due to weaker external demand and declining commodity prices net of imports, the key source of payment outflows, would determine potential output and employment losses in the near term,” he said.
For this year, Citigroup expects growth Philippine GDP of 4.1 percent—right at the low end of the revised government target.
Trinidad said that whether government spending could compensate for a drop in exports would be the key risk to GDP growth next year.
He predicted that exports would drop 10 percent next year, versus a modest growth of 1.5 percent this year, and that net exports would fall from 3.5 percent of GDP this year and to 1.6 percent next year.
“Less buoyant remittances” of foreign exchange from overseas Filipinos “would also be a risk to consumption,” he added.
Trinidad also said risks on absorptive capacity could restrain the government’s ability to use its infrastructure spending budget fully.
“A weak revenue outlook behind the larger fiscal deficit target would not necessarily result in more fiscal spending multiplier effects that can boost domestic demand,” he said.
Trinidad said the upside was that “the government could maximize the proposed 2009 cash budget disbursement ceiling of P1.43 trillion without having to worry about meeting the budget deficit target in case revenues falter.”
He said a soft landing for the Philippines might require lower central bank interest rates next year to complement the liquidity injection from a recent cut of two percentage points in banks’ reserve requirement.
He said the government’s downscaling of its growth targets flagged weaker demand prospects and signaled the decline in inflation to a single digit rate in 2009.
Doris C. Dumlao; edited by INQUIRER.net
