Monday, 31 August 2009

Philippine GDP growth to stay positive

P. L. G. Montecillo

QUARTERLY GROWTH results for the Philippines will be positive for the entire year, international analysts said, making the country one of a few to achieve the feat.

The economy will also likely grow at the high end of official government targets — currently at 0.8-1.8% for the year — given prospects of an improvement from the second-quarter result of 1.5%.

Growth in the first quarter was 0.6%.

In a commentary dated August 27, the International Institute of Finance (IIF) said the Philippines would dodge a recession this year and described the forecast feat "remarkable."

"After a one-quarter decline in the first quarter, GDP rose in the second quarter, and the yearago rate was 1.5%," said the IIF, the global association of financial institutions.

Seasonally adjusted, the economy contracted by 2.1% in the first quarter, then rebounded to 2.4% in April to June.

The annual growth of 1.5% topped the government’s forecast of -0.1% to 0.9% for the period.

The IIF, which counts as members over 370 financial institutions in more than 60 countries, said: "The Philippines is on a very short list (along with China and Indonesia) that will go through this downturn without posting a negative yearago quarterly GDP growth rate."

The country’s strong performance was attributed largely to an uptick in domestic demand, which was boosted by increased government spending and the steady flow of remittances from overseas Filipino workers (OFWs).

Dutch financial giant ING, meanwhile, said the central bank’s recent Business Expectations Survey — which showed a marked improvement in optimism — pointed to a good chance of continued acceleration for the rest of the year.

The confidence index posted a score of 18.4% for the third quarter, better than the -2.6% in previous period and a low of -23.9% in the first quarter.

"The Business Expectations index tracks year-on-year real GDP growth and it’s pointing to an acceleration to 4-5%," said Tim Condon, chief Asia economist at ING Financial Markets Research Group.

"As everywhere else in Asia, second-quarter GDP surprised on the upside," Mr. Condon pointed out in a note issued during the weekend.

Local brokerage firm Philippine Equity Partners, Inc. (PEP) shared the view, noting that while vital sectors like exports and investment spending shrank for the third consecutive quarter, they may have already hit bottom.

PEP analyst Jojo Gonzales, in a comment dated August 28, cited consumer spending, which posted a 2.2% expansion in the second quarter from 1.3% a quarter earlier.

PEP hiked its forecast for the economy, which it previously said would likely expand by 1.4% this year, to 1.8%.

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