Economists paint rosy picture of Philippines in ’12

Private sector economists believe that inflation will remain within manageable levels this year and the next because of the global economy, which they expect to perform poorly and continue to dampen price pressures in the country.

Also, with infrastructure spending picking up, the country’s economy in the first quarter of 2012 will certainly expand, topping the growth rate reported in the same period of 2011, the country’s chief economist said.

“That hope is based on the government’s ability on infrastructure spending and besides, the growth rate of Q1 2011 is not so high,” Socioeconomic Planning Secretary Cayetano W. Paderanga Jr. said in a text message.

Based on the results of the latest quarterly survey on inflation expectations conducted by the Bangko Sentral ng Pilipinas, economists from the private sector expect inflation to average at 4.2 percent this year and 4.1 percent next year.

The official target for the two years has been set at an average of between 3 and 5 percent.

In 2011, inflation stood at 4.4 percent.

Survey results show that the economists, mostly those working in banks, see a slight acceleration in inflation in the first quarter of this year due to the spillover effects of Tropical Storm “Sendong,” which hit the southern part of the country late last year.

“Nonetheless, the continuing weak global economic growth could help temper domestic inflationary pressures,” the BSP quoted the respondents as saying.

Respondents included economists from Banco de Oro, Bank of Commerce, Deutsche Bank, Goldman Sachs and Metrobank.

The BSP said that the low-inflation environment would allow it to further reduce key interest rates if needed to push domestic demand and speed up growth of the Philippine economy.

Last month, the BSP reduced key policy rates by 25 basis points. This brought the overnight borrowing and lending rates at 4.25 and 6.25 percent, respectively.

As for the economy’s growth prospects, Ruperto P. Majuca of the National Economic and Development Authority (NEDA) said that public construction would grow by a double-digit figure while government consumption would help reverse the contraction seen in the first quarter of 2011.

In a text message, Majuca said the services sector would experience rapid growth this year as political tensions in the Middle East and North Africa continued to wane.

“The business sector is also more upbeat, as seen from the strong performance of the stock market lately,” said Majuca, Neda assistant director general.

However, some private economists have expressed their reservations.

Cid L. Terosa of the University of Asia and the Pacific said that the first three months of 2012 would not necessarily be better than that of 2011.

“Government spending will indeed push growth, but we need to see stronger export growth and sustained consumption spending. Threats to Q1 growth include the volatility of petroleum products’ prices and adverse reactions to a prolonged impeachment trial,” Terosa said.

Also, Benjamin E. Diokno of the UP School of Economics said via e-mail that NEDA’s growth forecast is a bit optimistic.

“NEDA’s GDP [gross domestic product] growth forecast of 5 percent or higher for Q1 2012 is a bit optimistic. Perhaps it includes the usual ‘cheer factor’ of half a percentage point. But even the 4.5 percent GDP forecast, while attainable, is not likely,” Diokno said.

He added that the robust agricultural expansion in the first quarter of 2011 would be hard to repeat, while exports would continue to be sluggish.

In the first quarter of 2011, the country’s GDP grew by a mere 4.6 percent due to government underspending and the slowdown in global trade.