Economist group forecasts 2008 RP growth at 4.3%
abs-cbnNEWS.com | 10/09/2008 8:20 PM
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London-based economic think tank Economist Intelligence Unit (EIU) has downgraded its economic growth forecast for the Philippines to 4.3 percent in 2008, saying the country is certain to be hit by the turmoil in global financial markets.
The forecast was lower than the 5.4 percent projected prior to the onset of the credit crunch, and a drastic fall from the record 7.2 percent growth in 2007. For 2009, EIU sees the expansion of the local economy to stay weak at 4.2 percent.
Charles Goddard, editorial director for EIU Asia-Pacific, told reporters in a Makati news briefing Thursday that the ongoing crisis has began to affect the Philippines, particularly its banking and export industries.
Goddard, whose group will meet Filipino government officials for a roundtable discussion on Friday, said that President Arroyo's decision to draw a contingency plan speaks of the country's vulnerability to the financial crisis that has sent the United States and Europe on the brink of recession.
"No country is immune from this," Goddard said, as he warned that it would be more difficult for the government to tap overseas debt markets under present conditions.
Justin Wood, an economist at EIU covering Southeast Asia, said that demand for local exports will continue to slacken as prospects for two of the country's largest trading partners, US and Japan, remain poor.
High inflation, he added, will restrain consumer spending, the economy's main engine, while the central bank's tight monetary policy will derail investment plans of companies.
The EIU has lifted its inflation forecast for the Philippines to 9.7 percent in 2008 and 7.0 percent in 2009 from the average 2.6 percent last year.
The think tank said that rising risk aversion of foreign investors, coupled with rapid inflation and slowing economic growth, will pull the peso's value against the dollar this year and the next. The peso was Asia's best performing currency in 2007.
On the positive side, Wood said robust remittances from overseas Filipinos will still help cushion the economic slowdown.
He said sunshine industries such as business process outsourcing, tourism, mining and retail, also have the potential to buoy the economy higher than generally expected.
By 2009, the global economy is expected to slow to 2.0 percent, a threshold which, according to Wood, represent recession. He said economic recovery is not expected until 2010 or 2011.
