The Philippine economy will likely expand by 5.4 percent this year, slower than the pace last year but still outperforming the trend growth seen in the last decade, a Bank of the Philippine Islands research said.
In a commentary dated August 16, BPI said that while it anticipated the likelihood of anemic growth in the United States and Europe, it did not see the US credit rating downgrade by Standard & Poor’s having a major impact on its economic growth outlook for the Philippines.
The research, written by a team led by economist Emilio Neri Jr., indicated that while the recent global turmoil might take its toll on exports, one bright spot would be the government’s improving fiscal position which should give it leeway to counter the effects of a potential global slowdown.
Likewise, a benign inflation scenario is seen giving the Bangko Sentral ng Pilipinas (BSP) room to shift its monetary policy strategy to a more neutral or even accommodative stance in the near- to medium-term.
The research projected that the BSP would keep its overnight borrowing rate at 4.5 percent for the rest of the year before rising to 4.75 percent by next year. Inflation was seen averaging 4.6 percent this year and 4.5 percent next year, well within the central bank’s target range of 3-5 percent.
Neri said in an interview that the BSP might see no more need to raise its reserve requirement, which had been the route taken to tighten monetary policy in the past two sessions.
Domestic output as measured by gross domestic product was seen slowing from last year’s 7.6 percent to 5.4 percent this year before picking up to 5.6 percent next year.
BPI’s research said it had anticipated an economic deceleration for the Philippines in the first semester due to multiple factors, not the least of which was the difficulty in replicating 2010’s stellar performance without the benefit of election spending.
Despite the political turmoil overseas and the Japan disaster, it noted that the Philippines had managed to post a 4.9-percent year-on-year GDP expansion in the first quarter.
“While it showed a significant drop from the 8.4-percent growth posted in the same period last year, the latest figure does compare favorably with the average trend growth of 4.1 percent over the last 10 years,” it said.