ING unit sees Phl growth at 6.5%

MANILA, Philippines - The local unit of Dutch financial giant ING Bank NV said it expects the Philippine economy to grow by 6.5 percent this year, accelerating from the 3.7-percent growth in 2011.

This forecast falls in the middle of the government’s forget range of six-percent to seven-percent gross domestic product (GDP) growth in 2012.

ING economists pointed out that the Philippine economy remains fundamentally strong.

Exports have been picking up, growing 19.7 percent in May alone. Electronics, which accounts for majority of the country’s export, have recovered and forecast to expand five to six percent this year.

“Remittances from overseas Filipinos will remain strong at the forecast five percent this year, and the business process outsourcing (BPO) sector has not shown any sign of reversing its strong trend,” the ING Bank senior economist Joey Cuyegkeng said.

Government spending has increased and the agricultural sector has been making headway, he added.

Cuyegkeng also said he sees the peso ending the year on a high note, putting its 41.60 to a dollar forecast under review to take into account recent developments.

“We see it ending the year at 41.60. Everything however is under review,” Cuyegkeng told reporters on the sidelines of the ING Economic Briefing yesterday in Makati City.

“As you will notice, that (peso) has already surpassed that level, so we are continuously looking at it,” he added.

The Bangko Sentral ng Pilipinas (BSP) has a P42-P45 exchange rate assumption for this year.

The peso has appreciated by 5.3 percent since the start of the year, data from the Philippine Dealing and Exchange Corp. showed. The peso started the year at 43.940 last Jan. 2, but so far it has already risen to 41.60 as of yesterday’s open.

Cuyegkeng said the review will take into consideration the peso’s appreciation and moves by the Bangko Sentral ng Pilipinas (BSP) to tighten special deposit accounts (SDA) regulations.

“The BSP is seen trying to manage the appreciation of the peso,” he explained, pointing to the prohibition of foreign funds in SDA, banks’ fixed-term deposits with the central bank. He also noted of the cutting of interest charged on those deposits.

A strong peso is good as it makes imports more affordable and gives more purchasing power to consumers.

Similarly, however, a strong currency trims export earnings as Philippine products become cheaper abroad. It also decreases the value of remittances being received by families of overseas Filipino workers.