PHILIPPINE DAILY INQUIRER - October 4, 2009

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Bank raises economic growth forecast for RP

STANDARD CHARTERED BANK raised its economic growth forecast for the Philippines for this year and 2010, saying the domestic economy was benefiting from the unexpected rise in remittances and the stimulus efforts of the government.

For this year, StanChart expects the Philippine economy to grow by 1.5 percent, up from its original forecast of 0.7 percent.

For 2010, the international bank sees the country growing by 3.3 percent, faster than its original projection of 2.7 percent.

These projections are within the government’s growth targets of between 0.8 and 1.8 percent for this year and between 2.6 and 3.6 percent for next year.

“We have raised our forecasts for Philippine GDP (gross domestic product) growth due to stronger than expected overseas Filipino workers’ remittances and the continued plans for strong fiscal pump-priming next year,” StanChart said in a paper on its outlook on the Philippines.

The bank expects remittances to grow by 6 percent this year from $16.4 billion last year.

It said it was expecting remittances to rise partly because the recession in the United States, where many Filipino workers were based, was already easing.

Remittances from Filipinos working offshore were earlier feared to contract this year in view of layoffs in recession-afflicted countries. However, money sent by Filipinos overseas continued to grow due to the rising demand for manpower in alternative labor markets.

The Bangko Sentral ng Pilipinas earlier reported that remittances in the first seven months of the year hit $9.97 billion, up 3.8 percent from year-ago level.

BSP Governor Amando Tetangco Jr. said the latest data proved that its own forecast of a flat growth for the full year was too conservative. The BSP is revising its projection and will likely announce its new target this month.

To counter the adverse impact of the slowdown in global demand for Philippine exports on the country’s overall economic output, the government allowed a much higher deficit spending this year.

It had set a budget ceiling of P250 billion this year, much higher than the actual deficit of only P68.1 billion last year.

The Department of Finance said the government would revise its budget deficit ceiling for next year and would likely set it at P233 billion.

StanChart said the Philippines’ likely rebound from the economic slowdown would help attract foreign investments. As a consequence, it said, the peso would gain strength against currencies of trading partners.