Saturday, March 01, 2008 Philippine economy to grow, still By Malou M. Mozo Sun.Star Correspondent
An international bank maintains its positive outlook on the Philippine economy this year despite the country’s declining exports, a possible drop in remittances from overseas Filipino workers (OFWs) and political turmoil.
"In the last 10 years, you’ve gone through quite a substantial improvement and the trend is still going in the same direction,” said Nicholas Kwan, Standard Chartered Bank (Hong Kong) Ltd. regional head of research in Asia.
In an economic briefing last Thursday at the Marco Polo Plaza Hotel, Kwan said the threat of a recession in the United States could affect the entire Asia and slow down the region’s growth momentum by one to three percentage points.
He said the financial system problems in the US—brought about by a weakened equity market, a downtrend in the housing sector and an unproductive corporate sector—may involve a longer recovery period.
"We expect the recession to go on for another two years," Kwan said. This will negatively affect economies worldwide, even Asian giants like China, Japan and India, he added.
More suffering
"The world is not doing well. It's (only) a matter of time (for) you (to) see them suffer more. But we don’t expect anyone to be in recession or even go through a downturn," the economist said.
The key, he said, is in managing the fiscal and monetary policy.
"The Philippines is in a very good position because you have allowed the peso to appreciate so much. Now, it takes less inflationary pressure," said Kwan.
He said Standard Chartered’s positive outlook for the Philippines is mainly due to the “growth rate of 7.3 percent (the highest achieved by the Philippines in 31 years), inflation at 2.8 percent (which is the lowest), and fiscal account (being) the best in 10 years.”
"The Philippines had gone through so much rough time that I think it deserves more credit," he said, adding that the country is “one of the best positioned” in the region.
Kwan said that even the ongoing political turmoil, which involves alleged graft and corruption in the Arroyo administration, would not shake the market as long as it does not affect economic and monetary policies.
"There are similar political uncertainties in countries like Taiwan and Thailand that are not really causing much concern. It's the same here," he said.
Export sector
What Kwan believes to be a major challenge for the Philippine economy is addressing the country’s ailing export sector and rising inflation.
The export industry, which is crippled largely because of the peso’s appreciation, is also heavily dependent on the electronics sector, which make up 60 percent of exports.
But global demand for electronic products is slow and is currently "at the wrong edge of the economy," he said.
Those belonging to the commodity business, however, will likely survive because of continued demand, he added.
Kwan also expressed caution about OFW remittances, which enable the country to recover its revenue deficit. He said remittances this year are unlikely to reach the same level as the $12.8 billion in 2006 because 60 percent of the money transferred is in US dollars.
Kwan also said that with the slowdown in global demand for Philippine exports this year, domestic economic growth would not likely replicate the 7.3-percent GDP (gross domestic product) growth rate posted last year but the country would still experience growth by about five to six percent.
Despite the rising oil prices, which threatens to raise prices, Kwan said the Philippines was "fortunate that its dependence on imported oil had been greatly reduced."
He said, though, that while global oil prices remain to be high this year, it would likely decrease to an average of $82 a barrel this year.
