Q1 growth to remain positive – Guinigundo

MANILA, Philippines - Economic growth is expected to have remained firm in the first quarter, supporting the Bangko Sentral ng Pilipinas’ (BSP) decision to maintain policy rates at their historic lows last Thursday.

“Latest demand indicators are continuing to show good numbers of positive growth,” BSP deputy governor Diwa Guinigundo told reporters.

During its last policy meeting last week, the Monetary Board kept policy rates at their historic lows of 3.5 percent and 5.5 percent for overnight borrowing and lending, respectively. Rates were at that level since October last year.

The BSP, however, decided to slash anew the interest it charges on special deposit accounts (SDA) by another 50 basis points.

SDA rates now stand at two percent, following similar reductions in January and March.

The decision, Guinigundo said, should push out some P1.9 trillion in parked funds to the economy and provide more bank credit to the private sector, especially in building the country’s infrastructure.

Bank lending “continues to grow at double-digit levels,” expanding by 15.1 percent as of February and augmenting state disbursements targeted at boosting economic activity, he said.

Growth hit 6.6 percent last year, surpassing the Aquino administration’s five- to six-percent target for the year. For 2013, the goal has been set between six- to seven-percent. The first quarter data will be released this month.

“Government spending has continued to be sustained and so that will provide additional support to economic growth particularly to infrastructure and job creation,” Guinigundo explained.

At the same time, remittances are projected to stay robust by growing five percent this year. As of February, money from overseas Filipinos already grew above that, at seven percent year-on-year.

On the external front, Guinigundo said manufacturing would remain on expansion mode, providing support to exports which have already fallen by roughly a tenth for the first two months of the year.

“People have traced this to the slowdown in demand in electronic products. The manufacturers have drawn down their inventories and once they are completely drawn down, then there will be a resurgence in demand,” he explained.

The expected recovery of developed economies in Europe and the US, as well as growth acceleration in China, would also provide markets for Philippine goods.

“We have some improvements even if some improvements are gradual or at the slow side. We should be able to grow at about eight percent,” Guinigundo said, pertaining to exports growth.

“Several months down the line, we expect exports to begin recovering,” he added.