Standard Chartered sees Phl GDP at 3.8%

MANILA, Philippines - The Standard Chartered Bank (SCB) is forecasting the Philippine economy to grow by just 3.8 percent this year, and by a lower 3.2 percent in 2012. The economy will, however, strengthen to 5.3 percent in 2013, and consolidate at five percent in 2014.

In a report released yesterday, the international financial institution said the Philippines remains more resilient than other Asian economies in the face of deteriorating economic conditions of the Western economies.

“The main pillars of support for the economy in 2012 will be private consumption, government spending and investment,” it said.

Consumption will continue to be supported by solid inward remittances from overseas workers.

 “Government spending is expected to gather pace, after falling short of expectation in 2011, as public-private partnership (PPP) infrastructure projects get underway in 2012,” the global institution said.

Consumer price index (CPI) is forecast at 4.7 percent this year, 3.7 percent in 2012, 4.4-percent the following year, and a flat four percent in 2014. The Philippine peso will remain at 43.50 to the dollar this year, but strengthen to 41.50 next year, 39.50 in 2013, and 38 in 2014.

The budget deficit will improve from negative three of the gross domestic product (GDP) this year to negative 2.8 percent next year.

Meanwhile, the export sector may start to strengthen in the second semester of 2012 as demand resumes.

“We expect exports - especially of electronics, which accounted for 60.4 percent of the 2010 total – to regain momentum in the second quarter of 2012, when global demand and regional supply chains are likely to be back on track,” the report stated.

SCB said that inflationary pressure will ease next year as higher oil and food prices dissipate on weakening global demand.

The bank suggested that the Bangko Sentral ng Pilipinas (BSP) could reduce reserve requirements on banks as a tool to adjust liquidity. It is presently at a historical high of 21 percent.

SCB forecasts that Asia’s GDP growth will slow to a still-robust 6.5 percent in 2012 from 7.3 percent in 2011. China is expected to cool significantly in the first few months of 2012 before rebounding, helped by a major policy boost. As a result, China’s growth will decelerate from 9.2 percent to 8.1 percent next year.

Growth in India, Asia’s third-largest economy, is expected to accelerate mildly to 7.4 percent in the fiscal year starting April 2012, from seven percent in the current financial year. Indonesia, Southeast Asia’s largest economy, is forecast to slow to 5.8 percent from 6.5 percent.

Meanwhile, SCB sees 2012 as a year of a two-speed global economy. The bank sees a slowing global economy in 2012, with a fragile West and a resilient Asia, Africa, Middle East and Latin America.

The mounting crisis in the advanced economies is expected to cause the euro area (-1.5 percent) and the UK (-1.3 percent) to fall back into recession and US growth (+1.7 percent) to remain below-trend.

 The world economy grew strongly in 2010, expanding 4.3 percent, before cooling in 2011, when it grew by around three percent. In 2012, Standard Chartered expects a significant slowdown in the first half of the year because of the crisis in the West, slowing global growth to 2.2 percent for the full-year.