Saturday, 10 October 2009

UA&P economist sees 4.4% growth in 2010

By Lawrence Agcaoili
The Philippine Star

MANILA, Philippines - An economist of the University of Asia and the Pacific (UA&P) sees the country’s domestic output recovering strongly next year on the back of robust remittances from overseas Filipino workers (OFWs), election spending and pump-priming activities of the government.

Dr. Victor Abola told participants of a forum sponsored by the Rural Bankers Association of the Philippines that the country’s domestic output as measured by the gross domestic product (GDP) would expand by 4.4 percent next year from the projected 2.1 percent growth this year.

“I am more optimistic than the Philippine government. We will make it a little over two percent this year and 4.4 percent next year. The 2009 and 2010 growth could be faster with easier monetary policy and lower interest rates,” Abola said.

The government through the Development Budget Coordination Committee sees the GDP expanding between 0.8 percent and 1.8 percent this year and by 2.6 percent to 3.6 percent next year. The GDP growth slackened to 3.8 percent in 2008 from 7.1 percent in 2007.

Abola said growth drivers next year would include consumption with the strong purchasing power of beneficiaries of overseas Filipinos remittances, agriculture, business process outsourcing sector, mining as well as education and training.

He pointed out that the Philippines avoided recession after posting a GDP growth of 1.5 percent in the second quarter after a dismal 0.6 percent expansion in the first quarter.

The economist said the country’s GDP is likely to expand above 2 percent in the third quarter and above 4 percent in the fourth quarter.

“We are in an upward growth path. We are in a better position than the past crisis,” Abola said.

He added that the country’s inflation is expected to ease to 3.2 percent this year before inching up to about 3.9 percent.

According to him, prices of oil have gone down while the International Monetary Fund (IMF) sees the price of rice declining by nine percent next year after the projected 26 percent drop this year.

Abola said the Bangko Sentral ng Pilipinas is likely to keep policy rates at record lows of 4 percent for the overnight borrowing rate before increasing it to 4.5 percent by the second half of 2010.

“I don’t think inflation will be a major concern,” he said.

Based on estimates, he said the damages caused by tropical storm Ondoy and typhoon Pepeng would have a minimal 0.1 percent growth of GDP since the projected upsurge in spending to rebuild houses and buying new appliances and motor vehicles would more than make up for the decline.

“There will be a double dip. It is not going to be a V type of recovery but a W type of recovery. The recovery is going to be slow,” Abola warned.

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