MANILA, Philippines – German banking giant Deutsche Bank AG said it expects the Philippine economy to grow five percent this year, slowing down from the estimated 6.5 to 7 percent growth in 2010.
“It is our belief that the Philippine economy will grow by a healthy five percent due to an expected upside of the fiscal sector, strong remittance inflows, and bright future of the business process outsourcing sector,” Deutsche Bank chief economist for India, Indonesia and the Philippines Taimur Baig said in a press briefing yesterday.
Earlier, World Bank senior economist Eric Le Borgne said they are likewise looking at a five percent gross domestic product (GDP) growth in 2011.
“(This year) the stimulus package may have already been fully matured without a need for any extensions, and the real value of remittances from overseas Filipinos would actually be flat with the strengthening peso,” Le Borgne said.
The peso is still expected to strengthen in the range of 44 to 43 against the US dollar this year. “We just hope that the BSP will not aggressively put the lid on a strengthening peso,” Baig said.
Baig added that they also expect the Bangko Sentral ng Pilipinas (BSP) to raise interest rates by a total of 100 basis points for the whole of 2011, either in two or four tranches.
Inflation will likewise expect to move up to from its present range of 3.5 to 4 percent to around five percent, although the impact is expected to be minimal.
“It will remain muted especially for the Philippines as it has an automatic price adjustment mechanism in the case of fuel,” he added.
But Baig said exports remain one of the major concerns since a large portion of Philippine exports goes to the US and Europe.
Le Borgne said the Philippines, whose exports are dominated by electronics and semiconductors, is vulnerable to the risks of a slowdown in demand from developed countries.
“Forward looking indicators in the electronics and semiconductor sector are positive, albeit slightly down in the past quarter,” said Le Borgne.
“On the services side, the BPO industry is booming and despite concerns of a sharp and pronounced appreciation of the peso, the sector’s shortterm growth prospects are favorable.”
Food price shocks also pose a risk, but rice supply constraints are not expected in the near term in the Philippines given decent palay production in the latter part of 2010 and
large stockpiles at the National Food Authority.
Based on the latest Global Economic Prospects report of the World Bank, emerging and developing countries are expected to expand six percent in 2011, down from a seven percent pace in 2010, But that was more than double the 2.4 percent rate expected to be clocked by high-income countries this
year, slowing from a 2.8 percent rate in 2010.
Overall, the bank estimates global growth of 3.3 percent this year following a 3.9 percent rate in 2010.
Growth in both high-income and developing countries, however, was expected to pick up toward mid-2011, and “settling at rates close to their longerrun potential.”
Threats that could derail the recovery include the eurozone financial market crisis, volatile capital flows and the rising prices of commodities, including food and fuel, the 187-nation institution said.