Barclays Capital sticks to 5% growth forecast for PH in 2011 | Inquirer Business

Barclays Capital sticks to 5% growth forecast for PH in 2011

MANILA, Philippines—Barclays Capital is maintaining its growth forecast of 5 percent for the Philippines in 2011 despite the first-quarter performance settling lower than it expected.

The National Statistical Coordination Board reported a 4.9-percent growth rate for January-March, but Barclays Capital expected 5.1 percent.

Even then, the investment bank said in a research note that first-quarter GDP grew by 1.9 percent compared to the previous quarter.

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This is “above expectations of 1.6 percent and compared with 0.3 percent previously,” the bank said.

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“We continue to expect the BSP (Bangko Sentral ng Pilipinas) to keep [overnight borrowing] rates unchanged in June to gauge developments in inflation expectations, but to deliver another 25-basis point hike to 4.75 percent in July,” it added.

In a separate research, UBS Securities said large inventories meant for export have been behind the gaping Philippine trade deficit seen in the first quarter, which did not indicate an overheating economy.

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The Switzerland-based investment research firm said the rise in imports likely represented a temporary rise in inventories, not for domestic economy reasons but because of outcomes in regional and global economies.

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Data from the National Statistics Office show that the country posted a trade deficit of $3.368 billion in the first quarter, more than double the $1.441 billion recorded in the same period of 2010.

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“We find surprisingly little evidence of excess in the Philippine economy,” said UBS economist Edward Teather.

“Instead, the wider trade balance is largely a function of a sharp jump in intermediate goods—imports—which implies a rise in inventories rather than booming consumption,” Teather said.

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He said bigger deficit tied in with a UBS forecast for a “soft patch” in global growth based partly on higher inventories.

Teather said UBS has been expecting China—which, along with Hong Kong, has taken up a fifth of Philippines exports—to see an inventory-related economic slowdown.

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“Far from suggesting an overheating economy, the Philippines’ gaping trade deficit suggests an over-estimate of demand on the part of Philippine exporters,” the economist said.

TAGS: Banking, Economy and Business and Finance, Gross Domestic Product, investment bank

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