P72-B stimulus may not speed up economic growth, says DBS

MANILA, Philippines—The growth of the country’s economy in 2011 may turn out to be less than the forecast 4.8 percent despite the P72-billion stimulus package unveiled Wednesday, according to the DBS Group.

The Singapore-based financial services group said in a research note that, at less than one percent of gross domestic product, the pump-priming kitty “appears too small to make much of an impact on” growth.

According to the Department of Budget and Management, the amount covers P5.5 billion for the repair of infrastructure damaged by recent typhoons; some P4.9 billion for agriculture and agrarian reform; P13.75 billion for local government units; P11.05 billion for housing, relocation and resettlement; and P2.4 billion for healthcare.

Also, DBS noted how Malacañang had lowered its growth forecast range for 2011 after the country was hit hard by the sharp decline in global demand for its export goods.

The interagency Development Budget Coordination Committee, which includes state economic managers, said it had adjusted growth forecast for the economy to 4.4-5.4 percent from 5-6 percent.

The National Statistics Office reported that export revenues fell for the fourth consecutive month at 15.1 percent year-on-year in August.

“With no clear signs of a rebound, downside risks dominate our 4.8-percent growth forecast for the year,” said the Singapore group.

DBS economists said Philippine exports could grow at an “anemic” 1.5 percent in 2011, much lower than the government projection of 5 percent.

“But if the numbers fail to improve sequentially in the coming months, it is conceivable that export growth may turn negative,” DBS said. “Accordingly, the (Bangko Sentral ng Pilipinas) is expected to keep monetary policy accommodative to support the domestic economy.”

This means that DBS does not expect the BSP to cut rates during the monetary policy meeting next week. But it acknowledges that “the risk of a rate cut is now higher, with Indonesia having already led the way.”

Last Tuesday, the Indonesian central bank cut its policy rate by 25 basis points to a record low of 6.5 percent, citing expectations of a weaker global economy that would affect its exports much the same as with the Philippines.