Economy seen to make 'slow, steep climb' this year

MANILA, Philippines – Metropolitan Bank & Trust Co., the country’s biggest lender, expects the Philippine economy to make a “slow, steep climb” in 2009, although ending at a marginal 0.25-percent growth rate for the whole year.

“The Philippine economy is expected to still face headwinds in the coming quarters and is in for a slow, steep climb to recovery,” the bank said in its 2009 outlook report.

Earlier, the Congressional Planning and Budget Department (CPBD) of the House of Representatives cut its economic growth forecast for 2009 on the back of the lower-than-expected 0.4-percent growth in the first quarter.

From a previous forecast range of 3.2 percent to 4.1 percent for 2009, the CPBD revised its economic growth assumption to a range of 0.6 percent to 1.8 percent. This is just slightly lower than the government’s latest economic growth projection of 0.8 percent to 1.8 percent.

Metrobank said consumer spending, a driver of economic growth, would recover from its first-quarter slump on the back of the continued easing of consumer prices.

“However, it should be noted that it would take much more than the slowing inflation to make up for whatever caused the significant turnaround in personal consumption, a main growth driver,” it added.

Exports, meanwhile, are seen to post positive growth towards yearend as global trade starts to pick up again, but the full-year average growth will remain in negative territory, the Metrobank report said.

The CPBD said the government also needs to boost spending to pump-prime the economy.

It noted that in the first quarter of the year, the government disbursed only P355 billion or P6.8 billion below the programmed spending of P361.9 billion.

“Hence it is imperative to implement urgently and strategically the P330 billion economic resiliency plan to cushion the adverse effects of the global financial crisis on the economy and maximize its contribution to growth, employment and poverty reduction,” the CPBD said.

But Metrobank pointed out government infrastructure spending will only slightly impact on overall GDP growth as it only accounts for merely two percent of total.

GDP, the measure of economic activity in a country, is the sum of all goods and services produced in a country in a given period of time.

“It needs to take determined steps to plug the deficit as any fiscal slippage could attract credit downgrades and higher debt service costs,” Metrobank warned.

So far, the country’s rating has remained at the stable to positive levels. Moody’s rated the country’s sovereign rating at B1 (positive) while Fitch Ratings placed it at stable.

Also, Metrobank said the peso would remain under pressure as demand for dollars picks up ahead of the import season in the third quarter and as worker remittance inflows continue to slow.