MANILA, Philippines–The Philippine economy this 2012 will likely grow at a faster pace than the previous year, supported by stable interest rate as well as consumer spending that derives strength from the billions of dollars sent home by millions of overseas Filiipino workers, according to Banco de Oro Unibank.
Also, the country’s economic condition will remain sound—able to withstand the effects of the lingering debt crisis in Europe and uncertainties in the United States, said Jonathan Ravelas, chief market strategist at the country’s largest bank.
In a research note, the economist projected that the country’s gross domestic product (GDP) would grow by 4.5 percent this year—higher than the 4-percent rate expected for 2011.
The government’s growth expectations appear to be rosier, settling at 5.5 percent for 2012, and 5 percent for 2011.
In 2010, the country’s GDP grew at a robust 7.6 percent due to the rebound in exports and steady growth in remittances.
Ravelas said resilient OFW inflows and other strong macroeconomic fundamentals were the Philippines’ “saving graces” that would enable it to ride a tough 2012.
He added that the sunshine industries, expansion of energy and mining investments, as well as construction of low- or medium-cost housing and office buildings, will contribute to the country’s economic growth in 2012.
Meanwhile, Ravelas listed agribusiness, consumer durables, information technology, health beauty and wellness, transport, telecommunications and tourism as among the sunshine industries, or those that are expected to become more important in the future.
Ravelas predicted that “2012 will be a tough one, with reduced global growth outlook due to global uncertainties.”
Financial market barometers, he added, would “experience near-term volatility but should stabilize in the medium term.”
Investors are expected to hold on to their cash as the global impact of the crisis in the euro zone continues to shake markets.
“We may experience near-term volatility … but once investors realize that we can withstand these so-called headwinds, they will start rolling their funds again in the financial markets,” Ravelas said.
Trouble abroad curbed the country’s economic growth last year and dampened the market. The debt crisis in the euro zone rattled investors and heightened demand for safe haven and assets such as US dollars and bonds.
In the United States, plans for economic stimulus in the near term and fiscal austerity in the medium term led to uncertainties that kept investors on the edge.
At the same time, the political tension in the Middle East caused crude prices to soar, while the earthquake, tsunami and nuclear accident in Japan stalled manufacturing.
As investors return to markets, stable interest rates and foreign exchange rates will ensue, leading to “a vibrant economy, which is reflected by a rising equity market,” Ravelas said.
The main-share Philippine Stock Exchange index will likely hit the 5,000-point mark in 2012, he said. The PSEi finished at 4,371.96 points in the last trading day of the year.
The BDO strategist forecasts the exchange rate to average 40.70 to a dollar this year, compared to the 43.80 to a dollar he projected for last year. The government believes that the peso-dollar rate will average 42.00 this year, the same as last year.
The three-month interest rates will likely average 3 percent this year, unchanged from last year, Ravelas said.
He also projected that inflation would average 4.5 percent this year, slightly lower than the 4.7 percent seen in 2011.