Tuesday, March 11, 2008 Growth forecast to slide to 4.1
A REGIONAL financial research expert sees the Philippine economy’s growth rate to slide down to 4.1 percent this year from the 7.3 percent growth recorded in 2007.
“It is very unlikely that the Philippines will get the same growth rate as last year but it is still seen to achieve a sustainable growth this year,” said Nicholas Kwan, Standard Chartered Bank (Hong Kong) Ltd. regional head of research in Asia.
United Kingdom-based Standard Chartered’s economic growth forecast of 4.1 percent by year-end is below the government’s economic growth projection of 6.3 percent to seven percent.
“But a 4.1 percent growth is already positive for the Philippines. It is a sustainable growth rate for most countries in the Asian region,” Kwan told reporters and clients of Standard Chartered Bank in Cebu in an economic briefing recently.
The estimated growth rate, he said, will give economic stakeholders “more room to echo the challenges, reduce inflation pressure, and allow room for lower interest rates.”
The fastest-growing economy in Southeast Asia, the Philippines posted a real gross domestic product growth rate of 7.3 percent last year, its fastest pace in 30 years, Kwan said.
Recession
Kwan cited external global challenges, such as the threat of recession in the United States (US) economy which will adversely affect dollar remittances to the country.
He added that remittances this year are unlikely to reach the same level as the $14.4 billion in 2007 because 60 percent of the money transferred is in US dollars.
“Once the US enters into a recession, we expect it to go on for another two years,” he said, adding this will negatively impact economies worldwide, even the Eurozone and Asian giants like China, Japan and India.
The Hong-Kong based economist said another major challenge for the Philippine economy is its ailing export sector which was “badly hit” last year due to the weakening demand for export products in the US—the country’s number one trading partner.
Exports
Because of the downturn in the US market this year, Kwan said the bank has projected exports coming from the Asian region to the US will experience zero percent growth.
“Anyone who is growing maybe looking at markets other than the US. America is important but it’s not the only market,” he said, saying exporters are now advised to start venturing into emerging markets like Europe and Canada to cushion the industry from the negative impact of the ailing US economy.
Kwan said there is a huge risk that the country’s export sector will contract this year, given its high exposure to electronics—accounting to about 60 percent—unlike its counterparts in Malaysia (50 percent) and Singapore (40 percent).
He earlier said the global demand for electronic products is slow and is currently “at the wrong edge of the economy.”
Kwan said, though, that if the Philippines can maintain its economic policies, it is in a good position to withstand the negative external factors.
He noted the country has a strong foreign reserve and sound fiscal and economic policies, thus improving the companies’ balance sheets. (MMM)
