RP growth seen to slow to 4.1% in 2008

Philippine economic growth is forecast to drop dramatically to 4.1 percent this year, a top bank economist said.

The country’s gross domestic product (GDP) expanded 7.3 percent in 2007, the fastest pace in three decades.

In an economic briefing, Simon Yuen, regional economist of Standard Chartered Bank (SCB), said the Philippines has been unable to decouple itself from the US economy, which is on a prolonged slowdown.

He said inflation is seen to average 6.2 percent in 2008 and 4.1 in 2009, accelerating from 2.8 percent last year. From the 5.5-percent average the first three months of 2008, Yuen said inflation could surge to 8.1 in the second quarter due to record high levels of oil and rice.

Meanwhile, the peso will weaken to 43 against the dollar at the end of the year but rebound to 38 in 2009. On a quarterly basis, the peso is forecast to stay at the 42 level, moving up slightly to 42.50 and to 43 in the final three months of 2008, he added.

“Nonetheless, the Philippine economy will remain resilient and is still poised to register strong growth versus negative external conditions,” the SCB economist said. He noted, however, that the critical point is how the National Government will deal with inflation, low interest rates, high commodity prices, poor revenue collections and fiscal reforms.

The Philippines is ranked among the Asian countries most affected by high food prices, owing among others to its strong reliance to the US economy and the dollar, and as a net importer of crude and rice.

Yuen warned that the Philippines must increase its spending on the agriculture sector.

As far back as 1975, the Philippines was the third best investor in the agriculture sector after China and Indonesia. But by the early ’80s, Thailand overtook the Philippines.