RP economy to grow by 3.8% next year - DBS

The Development Bank of Singapore (DBS) expects the Philippine economy to grow by 3.8 percent next year, just a shade higher than the low end of the official gross domestic product (GDP) growth forecast range of 3.7 percent to 4.7 percent for 2009.

DBS said the global economic tide would lead to lower earnings from exports and less dollar remittances from overseas Filipino workers. This, it said, would lead to slower economic growth.

The investment bank said next year would be more difficult compared to this year given the prolonged effects of the global recession.

“Come 2009, however, we expect the economic slippage to become much more stark, with our estimates pointing to 3.8 percent,” DBS said.

For 2008, DBS said GDP growth could average 4.7 percent with the third quarter growth also at 4.7 percent, close to the high end of the official forecast range of 4.1 percent to 4.8 percent.

Last Monday, the National Economic and Development Authority (NEDA) released its growth projections for the third quarter, putting it at 3.8 percent to 4.6 percent. The government is expected to announce the actual figures tomorrow.

According to DBS, all the components of GDP except for capital spending are likely to post slower growth this year. 

“Private consumer spending will likely reflect the combined effects of slower remittance growth and still-elevated inflation, slipping for a third quarter to 2.3 percent year-on-year in the third quarter of 2008 and the slowest year reading since the fourth quarter of 1991,” DBS said.

The investment bank said exports and imports are also likely to contract.

Furthermore, the investment bank said consumer spending is likely to remain weak throughout next year despite the passage of the law granting tax exemption on minimum wage earners and increasing the tax perks for middle-income earners.

In the first half of 2008, GDP grew 4.6 percent, much slower than the 7.6 percent recorded in the same period last year. In 2007, the economy grew by 7.2 percent.