Saturday, 29 May 2010

JP Morgan, Goldman Sachs turn bullish on Philippine economy

By Michelle Remo
Philippine Daily Inquirer

JP MORGAN HAS RAISED ITS growth forecast for the Philippines for 2010, acknowledging that its earlier optimistic outlook still turned out to be conservative given the robust expansion of the economy in the first quarter.

The investment bank now expects the economy, as measured by the gross domestic product (GDP), to grow 6.8 percent this year from its earlier forecast of 4.5 percent.

The government expects the economy to expand anywhere between 2.6 and 3.6 percent, although government officials are considering to revise the target upward following the release of the first-quarter economic performance.

“In line with most of the region, the Philippine economy started 2010 on a robust note [that is] much higher than market expectations,” JP Morgan said in its latest paper on the Philippines titled “Philippines: Economy Started the Year on a Very Strong Note.”

The investment bank said the faster-than-anticipated pace of growth in the first three months would likely prompt the Bangko Sentral ng Pilipinas to finally raise its key policy rates during the Monetary Board meeting on June 3 after keeping these at historic lows since July last year.

The central bank’s rates are at 4 percent for overnight borrowing and 6 percent for overnight lending. The low interest rates were intended to encourage borrowings, which should boost consumption and investments.

JP Morgan said the BSP could start raising interest rates soon given that the economy has already shown a firm recovery.

Another investment bank, Goldman Sachs, also expressed a positive outlook on the Philippines.

“The [first quarter of 2010 performance] confirms that the recovery process is firmly underway and we expect it to continue to get support from the two engines of flows—stable remittances and growing IT [information technology] service exports,” Goldman Sachs said.

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