Philippines seen to post growth rate of 4 to 4.5% in 2012

MANILA, Philippines—Standard & Poor’s expects the Philippines to post a respectable yet lower-than-desired growth rate of 4 to 4.5 percent in 2012, saying domestic consumption might still be strong but export earnings would likely remain anemic given the economic woes in export markets in the West.

Government economic officials said an ideal growth rate for the Philippines should at least be 7 percent for it to result in actual poverty reduction.

Nonetheless, S&P described the growth-rate projection for the Philippines, as well as for other Asia-Pacific countries, as decent given that advanced economies, led by those from the eurozone, would likely post growth of less than 1 percent, if not register a mild recession.

The credit-rating agency also said the likely deceleration of China in 2012 would further dampen export earnings, and thus overall growth, of other Asia-Pacific economies.

“A shaky external environment along with a policy-induced slowdown in China would impede growth rates across the region in 2012,” S&P said in a report on its 2012 outlook for Asia-Pacific.

“Nevertheless, hardy domestic demand will enable countries to post respectable—albeit lower—growth rates this year,” the credit-rating firm added.

For 2011, S&P expects the Philippines to have posted a growth of 4.1 to 4.6 percent.

The projections for 2011 and 2012 are much slower than the actual growth of 7.6 percent in 2010, when the country expanded by its fastest pace of 7.6 percent in three decades.

The anticipated slowdown last year and this year is due to the prolonged crisis in the Eurozone, as well as the slow recovery of the United States from the 2009 recession. The eurozone and the United States are two of the biggest export markets for goods produced by the Philippines and other emerging Asian economies.

S&P said domestic demand in the Philippines and its neighbors would likely remain robust this year as their growing economies would prompt consumers and investors to spend more. Domestic demand is thus seen to counter the ill-effects of export-earnings decline.

But the credit-rating firm said the increase in consumer prices resulting from higher domestic demand would likely be within manageable ranges. It expects inflation in the Philippines to average between 4.2 and 4.7 percent this year, within the government’s target of between 3 and 5 percent.

S&P said growth of countries in Asia-Pacific would partly depend on their reliance on exports to the Western economies.

“While all countries in Asia-Pacific will feel the heat of a sharp slowdown or a recession in Europe and the US, those with greater reliance on exports and with strong trade linkages are most vulnerable,”‘ S&P said.

The growth-rate projection for the Philippines for 2012 is better than those for Hong Kong (2.5 to 3 percent), South Korea (2.8 to 3.3 percent), Singapore (2 to 2.5 percent), Taiwan (2.3 to 2.8 percent), and Thailand (3.5 to 4 percent).

These countries rely more heavily on exports to the West than the Philippines does.

On the other hand, the growth-rate projections are better for Indonesia (6 to 6.5 percent), Malaysia (4.4 to 4.9 percent) and Vietnam (5 to 5.5 percent).