Thursday, 5 November 2009

BDO sees GDP growth exceeding government target

Erik de la Cruz
Business Mirror
http://www.businessmirror.com.ph/home/economy/18185-bdo-sees-gdp-growth-exceeding-government-target.html

The domestic economy will grow by 2.3 percent this year according to Banco de Oro Unibank (BDO), a more upbeat forecast than the government’s growth projection of 0.8-1.8 percent.

The economic research team of the country’s biggest bank, in a report released on Wednesday, predicts growth next year will be a bit faster at 2.5 percent, but below the government’s target of 2.6 percent to 3.6 percent.

“The country is struggling to rise above the challenges in the wake of the recent calamities that besieged the country,” says BDO chief market strategist Jonathan Ravelas, referring to the onslaught of recent back-to-back typhoons.

But on a positive note, he said “growth prospects continued to improve” following the better-than-expected performance of the economy in the second quarter of this year, and with the global economy now recovering from the deepest slump seen in decades.

“Strong indicators of rising economic activity have supported the rise in the global financial markets,” Ravelas said. He noted, however, that “the US and the rest of the world are still a few distance away from full recovery as joblessness remains high and demand has not returned to pre-crisis levels.”

He painted a more upbeat scenario in 2010, saying the Philippines’ gross domestic product (GDP) will grow a bit faster because of “a much-improved global outlook as developed countries post positive growth while Asian [nations] lead economic recovery.”

 He said domestic demand will drive GDP growth next year, boosted as usual by money remitted by Filipinos abroad, and further by election spending and the government’s rebuilding efforts in calamity-stricken areas.

With the global economy expected to pull out from recession by next year, Ravelas said investors will become more willing to invest in riskier emerging-market assets. The Philippines, particularly the local stock market, is thus expected to benefit from increased capital flows, he said.

Foreign direct investments are also seen picking up next year, especially after the May elections, as the new government bares its economic-growth agenda for the next six years, he said.

A “healthy” external-payment position will boost the peso-dollar exchange rate to 46 next year from a projected year-end level of 47.75 this year.

“The [balance of payments] is expected to post a higher surplus, fundamentally supported by remittances, increased capital inflows and revived exports,” Ravelas said. The country’s gross international reserves “should remain [at] record levels, adequately covering import requirements.”

He expects the Bangko Sentral ng Pilipinas to hike its key interest rate by 75 basis points in 2010 from the current record-low level of 4 percent.

Interest rates will have to be jacked up, he said, as inflation is bound to rise on pump-priming measures and election spending, and with expectations of higher consumer prices going forward amid increasing demand.

The government’s budget deficit is projected to be at a level equivalent to 3.5 percent of GDP this year. The ratio is expected to drop to 3 percent next year and further to 2.88 percent in 2011, he said.

1 comment:

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