Monday, 4 May 2009

No growth slippage in the Philippines

Jun Vallecera
Business Mirror

ALL the economics experts have been saying the Philippines will sustain a huge growth reduction of a magnitude reflecting the current global economic downturn.

First was the International Monetary Fund (IMF)—whose resident representative forecast zero growth this year from 2.5 percent just two months earlier—then the Asian Development Bank (ADB) scaled back its growth forecast, followed more recently by readings from Standard & Poor’s which concluded that local output this year will continue to suffer no matter the ongoing attempts by the government to optimize growth via fiscal and monetary easing measures.

But as far as Bangko Sentral ng Pilipinas (BSP) Governor Amando Tetangco Jr. is concerned, the economy will still continue to push forward at a significant pace, albeit at a rate slower than previously seen.

“As I had said in the past, there are fundamental forces that would help the country avoid a major growth slippage.

“The strength of domestic consumption from our young and economically active population [is one],” Tetangco said in citing one such strength.

Some 45 million Filipinos aged between 15 to 64 years, the bulk of their number being young, are the main drivers of the country’s consumption activities which by itself accounts for more or less 75 percent of the gross domestic product.

He also cited the country’s reduced dependence on exports, which now accounts for only 29 percent of GDP from almost 50 percent in 2000.

He likewise said the number of displaced workers is still small relative to the overall stock of overseas Filipino workers, the majority of whom are higher-skilled and with longer contracts.

There is also the cost-competitive business-process outsourcing (BPO) industry, which remains attractive to firms that wish to streamline costs, according to Tetangco.

BPOs help strengthen the country’s external sector whose foreign- exchange earnings also help keep the country’s balance-of-payments forecast to remain in surplus this year, he added.

“From the BSP side, we had earlier moved to ensure that there is sufficient liquidity in the system. This, to purposely avoid the credit crunch that the majors are now experiencing,” Tetangco said.

“With the risks to inflation subdued, we have continued to calibrate monetary policy to support demand and ensure that growth prospects are kept steady,” he quickly added.

Inflation, whose corrosive impact on earnings is the one thing that pushes the BSP to make constant monetary policy adjustments, has moderated substantially to just 6.4 percent in March after having trended up to 7.3 percent in February.

Inflation in January averaged only 7.1 percent.

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