Consumption may again drive growth in 2012

Private consumption may again prove to be the domestic economy’s bright spot in 2012, aided by growth in remittances from overseas-based Filipinos, according to DBS Group.

The financial services firm said in a new research that increased government spending and the start of public-private partnership (PPP) infrastructure projects would also boost domestic demand.

“Consumer sentiment has probably been hurt by the weakness in the global economy and volatility in the financial markets,” the Singapore-based group said.

“As such, loan growth is likely to soften in the coming months despite an easing bias in monetary policy, impacting on private consumption. This is where remittances come into play.”

DBS expects remittances to continue to grow, but the amount in dollar terms may likely slow from the projected 7 percent in 2011 to around 5 percent in 2012 because around 60 percent of the cash sent to the Philippines come from the United States and the eurozone.

On the other hand, a weaker peso will offset the slower growth in remittances because this means recipients will get more pesos for their dollars.

DBS said the peso would trade at an average of 44.75 against the dollar in 2012 from the average 43.20 recorded from January to November this year.

DBS added that government spending and PPP projects would help shore up consumption growth.

The group explained that the announced P72-billion stimulus package and indications that spending had picked up only showed that growth in government spending could improve from the average of 1.2 percent of gross domestic product in the first nine months this year.

“We are cautiously optimistic that the long-delayed PPP projects will start to come on line in early 2012,” DBS said.

“After delays from reviews and revisions, some signs of progress have been made,” it added, referring to the pre-investment funding involving three projects in late November.

DBS cited the Metropolitan Waterworks and Sewerage System’s P25-billion New Water Supply Source project and the operation and maintenance of the Angat hydroelectric power plant and Macua mini-hydropower plant.

Finance Undersecretary John Philip Sevilla earlier said that the government had approved funding of P20 million and P60 million for feasibility studies, as well as technical assistance on the MWSS projects.

Also, technical assistance for the MWSS Balara Water Hub project has also been approved.