Friday, 30 January 2009

FT -- Philippine economy shows surprising growth

By Roel Landingin in Manila
Financial Times

Published: January 29 2009 05:04 | Last updated: January 29 2009 08:58

The Philippine economy grew by 4.5 per cent in the fourth quarter of 2008 from a year ago, surprising economists who had predicted a sharper slowdown in GDP growth from the 6.4 per cent in the same period last year because of the global downturn.

Despite the strong numbers, the Philippine central bank slashed key policy rates by half a percentage point on Thursday, as widely expected by the market.

The monetary authority cut its overnight borrowing rate to 5.0 percent and its lending rate to 7.0 percent. It also said there was room for further easing later.

It was the second 50 basis point cut in as many months and followed similar policy easing by central banks worldwide to stave off the effects of the global downturn.

Officials said economic expansion in the last three months of last year was buoyed by easing energy and food prices and higher remittances from Filipinos working abroad.

Consumer inflation fell to 8 per cent in December from a recent peak of 12.4 per cent in August. Remittances from Filipinos working overseas grew by 15.1 per cent in the first 11 months of the year to $15bn, as the number of Filipinos who left for jobs abroad went up by 27.8 per cent to 1.4m last year.

Strong consumer spending, which accounts for more than two thirds of the GDP, helped cushion the expected slowdown in GDP growth for the entire year to 4.6 per cent in 2008 from a 30-year high of 7.2 per cent in 2007. The annual rise in household spending, while generally weaker than the previous year, picked up slightly to 4.5 per cent in the fourth quarter from 4.1 per cent in the second quarter.

Ralph Recto, the economic planning secretary, said growth this year will likely slow further to 3.7-4.7 per cent as global demand for Filipino labor and merchandise exports ease. Manila is preparing a 330bn peso stimulus package, equivalent to a third of the budget, to create public works jobs and boost incomes through tax cuts and higher social security benefits, he said.

“Construction is seen to be a key growth driver for 2009 as the government realigns the budget to implement fast-moving infrastructure projects,” he said.

The government is also implementing measures to help Filipinos who have lost local or overseas jobs because of the global economic slowdown. It is giving small non-collateralised loans to help them acquire new skills or set up a small business. So far, the government labour department reported that 18,000 factory workers have been laid off. Some economists are predicting the number could go up to a few hundred thousands.

Copyright The Financial Times Limited 2009

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