UBS cuts Phl growth forecast

MANILA, Philippines - Swiss investment bank UBS scaled down the economic growth forecast for the Philippines together with other members of the Association of Southeast Asian Nations (ASEAN) this year and next year.

In a report, UBS economist Edward Teather said the investment bank has lowered its projected gross domestic product (GDP) growth for the Philippines to 3.6 percent instead of 4.3 percent this year and to 3.3 percent instead of four percent next year.

UBS also lowered the GDP growth forecast of Thailand to 1.5 percent instead of 2.6 percent this year due to the floods but hiked the growth projections for Indonesia to 6.3 percent from six percent, Malaysia to 4.7percent from four percent, and Singapore to 5.5 percent from 4.5 percent.

For 2012, the investment bank lowered the growth forecast of Malaysia to three percent instead of 3.5 percent, Singapore to two percent instead of three percent. It retained the GDP growth forecast of Indonesia at 5.5 percent but raised the GDP growth projection of Thailand to four percent from 3.2 percent.

Teather said revised economic growth forecasts took into account the lower growth forecasts for Europe as well as the impact of the recent floods in Thailand. “Our working assumption remains a trough in real GDP growth in early 2012,” he stressed.

Latest data from the National Statistical Coordination Board (NSCB) showed that the GDP growth of the Philippines slowed to 3.2 percent in the third quarter from 7.3 percent in the same quarter last year due to weak global trade and underspending by the Aquino administration.

Economic managers led by Socioeconomic Planning Secretary Cayetano Paderanga said it would be difficult for the government to meet the revised GDP growth of 4.5 percent to 5.5 percent set by the Cabinet-level Development Budget Coordination Committee (DBCC).

Teather pointed out that the financial and trade shock emanating from Europe would result in weaker growth and weaker capital flows into the ASEAN region in the near term.

“We conclude that still moderate increases in credit to GDP and other metrics of excess outside Singapore and a very large excess of income over domestic spending in Singapore should allow ASEAN-5 economies to weather the shock. We do not argue that the economic impact of the European crisis will be slight – we forecast meaningful growth slowdowns across the region,” he said.

According to him, UBS believes that crisis situations would not develop domestically in ASEAN.

He explained that ASEAN economies should be in a position to take global market share again assuming European policymakers do enough to avoid a dire global financial market outcome.

‘With a healthier credit environment, ASEAN was in a better position to benefit from the bounce in global growth that followed, allowing ASEAN producers to take global export market share,” the economist said.

For 2013, UBS also lowered the GDP growth forecast for the Philippines to 4.7 percent instead of five percent but retained the growth forecasts for Indonesia at 6.1 percent, Malaysia and Thailand at 5.5 percent, and Singapore at 5.7 percent.