FINANCIAL SERVICES firm Credit Suisse raised its estimate for Philippine gross domestic product (GDP) growth for 2011 to 4.6 percent from 4 percent to reflect stronger-than-expected growth in the fourth quarter of 2010.
However, the Zurich-based firm said it would monitor the immediate effects of the calamity in Japan on Philippine exports considering that the ravaged country was a major market.
GDP, the country’s total output of goods and services, grew 7.1 percent in October-December last year, helping annual growth to reach 7.3 percent—the highest since the Marcos administration.
The government itself is aiming at a growth rate of between 7 and 8 percent this year.
“Fundamentally, we do not see any reasons to be more optimistic on growth prospects and our growth expectation remains at the low end of consensus estimates,” Credit Suisse said.
Japan calamity
“We would also watch out for any near-term headwind from the recent calamity in Japan given that it is a leading export destination for Philippine exports even though a good chunk of exports to Japan are electronic products, which typically are low value-added,” it added.
Latest data from the National Statistics Office showed that as of end-January, Japan received the third-biggest or 14 percent of outbound shipments from the Philippines in terms of value.
Credit Suisse noted that as a percentage of GDP, total exports to Japan were smaller for the Philippines—at 4 percent—than for some of its peers such as Malaysia and Singapore.
Credit Suisse said it continued to expect some slippage in Malacañang’s 2011 fiscal position despite the 2010 fiscal deficit being in line with the government target.
Malacañang is hoping to reduce the budget deficit to P300 billion this year from P314.4 billion in 2010.
“The 2010 target was met by underspending in order to compensate for lower-than-targeted tax revenues,” Credit Suisse said. “But since no concrete efforts have been taken to raise the tax-to-GDP ratio, we think spending growth will need to be constrained.”
The company said that if the government wanted to meet the 2011 deficit target, it would need to spend at a much slower pace of around 6 percent year-on-year rather than the targeted 11.7 percent, it added.