Philippines seen weathering global slowdown
Citigroup economist forecasts 6.5% growth in ’08
By Doris Dumlao
Philippine Daily Inquirer
First Posted 00:32:00 02/07/2008
MANILA, Philippines -- Global banking giant Citigroup expects the Philippines to remain resilient to a widely feared US-led global slowdown and sustaining an average economic growth of 6.5 percent this year.
Citibank economist for the Philippines Jun Trinidad stressed that while domestic expansion this year would likely slow down this year from last year’s, a favorable fiscal and monetary policy environment would provide sufficient buffer against an expected weakening in exports and offshore demand for Philippine labor, allowing the country to sustain a respectable growth this year.
Trinidad’s projected growth in the 2008 gross domestic product (GDP) is well within the government’s official target range of 6.3-7.0 percent.
“It’s not as high as last year but it’s certainly going to be much better than what you’ll probably see in the US or in industrialized economies,” Trinidad said in a presentation for high-net-worth Citibank clients.
The government last week reported that GDP, the total amount of goods and services produced by the economy, grew 7.3 percent in 2007, its best performance in 31 years.
“Domestic demand will provide the spark and ensure that this year we’ll be growing by 6.5 percent,” he said.
He pointed out that the government’s increased spending, made possible by its improved cash budget position, and the central bank’s bias for lower interest rates would keep the country resilient to external shocks this year.
Trinidad said the first-quarter GDP growth would be slowest this year at 5.6 percent but expansion in the succeeding quarters would approach 7.0 percent. He projected growth in the second quarter at 6.9 percent, in third quarter at 6.7 percent and in the fourth quarter at 6.9 percent.
“Fiscal spending is creating new jobs so there’s a strong pick up in public and private spending. It will tide us through the dark clouds of a US slowdown,” he said.
But Trinidad noted that the export sector would be battered by the slowdown in the United States, which accounts for about 15-18 percent of the country’s export earnings.
“Imagine what happens to remittances when a global downturn happens and demand for Philippine labor may be at risk,” he said.
Citing local consumer behavior based on the central bank’s quarterly consumer expectations survey, Trinidad said spending on food and basic expenditures like education and housing would continue to be strong.
“In this environment of shrinking peso value of remittances, durable goods spending -- those expenditures than can be postponed, will be postponed,” Trinidad said, citing purchases of “durables” like house and lot and motor vehicles.
Singapore-based Florence Tan, head of Citibank research communications and advisory, said Citibank analysts were expecting the US economy to contract mildly in the first quarter given the downturn in the housing and equity markets and the consequent decline in consumer spending.
“But we do expect the US economy to regain momentum following that. Among the main sources of strength is coming from US exports. The falling dollar has made US exports more competitive than ever before,” Tan said.
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