Saturday, 27 June 2009

Philippines won’t slip into recession — Bangko Sentral


The Philippines will not slip into a recession as domestic demand will be boosted by remittances as well as government pump-priming, the Bangko Sentral ng Pilipinas (BSP) said on Friday.

Consumption, which grew by just 0.8% in the first quarter, will strengthen as overseas Filipino workers are expected to continue sending money home despite the global downturn, central bank deputy governor Diwa C. Guinigundo said.

"I don’t think we shall go into a recession ... We expect consumption spending will recover with continued strength of remittances," he said in an e-mail to reporters.

"I don’t share the pessimism of both the [International Monetary] Fund (IMF) and the World Bank. Their premise is that remittances will decline ... We think its going to be flat, at the least."

The BSP expects remittances to total $16.4 billion in 2009, the same as last year.

The IMF has said it expects the Philippines to contract by 1% by yearend as remittances dip by 4% due to the financial crisis. The World Bank, for its part, warned that the economy may shrink by 5% due to weaker trade and capital flows.

The government, however, expects the economy to grow by 0.8-1.8% this year.

Mr. Guinigundo said the government could increase spending later in the year, and added that private sector investment could also add to growth.

"Public sector spending could also accelerate in the second half of the year," he said. "BPOs (business process outsourcing) will also provide additional growth driver."

The economy grew by just 0.4% in the first quarter, pulled down by the global downturn and historic declines in manufacturing and trade. The result had some officials saying the country was teetering on the bring of a recession and prompted the government to trim this year’s official growth forecast to 0.8-1.8% from 3.1-4.1%.

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