The DBS Group has lowered its 2011 growth forecast for the Philippines to 4.6 percent from 4.8 percent, mainly due to the downtrend in export earnings amid dampened global demand for electronics.
In a new research note, the financial services group noted that merchandise exports for July and August were down by 1.7 percent and 15.1 percent year on year, respectively, “and the figure for September may be worse.”
“Even with a sequential [month-on-month] improvement in outbound shipments through the rest of this year, overall nominal exports growth is going to be anemic and may even slip into negative territory,” DBS said.
The group said that with shipment orders for North America-bound semiconductors still dipping in September, there are limited prospects for a meaningful uptick in electronics exports.
“The bright spot in the economy lies with domestic demand,” DBS said. “Despite the current crisis, remittances have remained relatively resilient, growing by 6.3 percent in the first seven months of the year.”
“On balance, domestic demand growth is not sufficient to offset the external drag for this year,” DBS added.
DBS paints a better picture for 2012 exports, keeping its projection at 5.2 percent to reflect a moderate recovery in the global economy.
“Higher investment through the delayed public-private partnership infrastructure projects should also help bolster growth next year,” DBS said.
Further, the group said that the Bangko Sentral ng Pilipinas is likely to maintain its overnight borrowing rate at 4.5 percent during its policy meeting today.
DBS reiterated that monetary policymakers will focus on economic concerns while the inflation outlook remains benign despite near-term price pressures arising from typhoon damage on crops.
“We maintain our forecast that inflation will reach 4.9 percent in 2011 and 4.7 percent in 2012,” the group said.
DBS said that with inflation unlikely to pose much of a problem until late 2012, any form of monetary tightening will be pushed back. “We no longer [predict] any rate hikes through to the third quarter of 2012.”