The Philippines will not slip into recession

According to the Bangko Sentral ng Pilipinas (BSP), the Philippines will not slip into a recession as domestic demand will be boosted by remittances as well as government efforts. The BSP expects zero growth in remittances this year based on last year’s $16.4 billion inflow. Central bank cites better export outlook than what it was several months ago as the demand for electronics products, which accounts for as much as 60% of exports, is expected to improve in the second quarter.

Likewise, according to Theresa Marcial-Javier, head of investment management at the Bank of the Philippine Islands’ Asset Management and Trust Group, the domestic stock market index was likely to consolidate at the current level. Marcial-Javier added that earnings should catch up for the index to continue rising since the 40% surge at the start of 2009.

However, according to the Institute for Development and Econometric Analysis, Inc. (IDEA) latest NewsBriefs, budget deficit climbed to Php123.2 billion as of May, close to half the full-year’s target but still within expectations amid increased expenditures and declining revenues. The January to May deficit was more than six-fold of the Php18.8 billion deficit incurred in the same period last year. For the month of May alone, the shortfall was Php11.4 billion which is a reversal of last year’s Php7-billion surplus. Also, amid the worse drop in GDP growth and tax revenue, Moody’s Investors Service warned it may remove the positive outlook on the Philippines’ B1+ sovereign rating. Moody’s expects the country’s GDP growth this year to be around 1%, per same published report.

On the other hand, the global economic downturn has put a dent on importation which translated to lower revenues for the Bureau of Customs (BoC). Treasury data showed that collection for April dropped by 8% from the Php70.6 billion collection a year ago. Merchandise imports plunged by a record 37.4% in April, now the highest annual fall, due to steeper imports of key electronic products. Electronic products, which accounted for nearly a third of total imports, plummeted by 42% to $924.42 million from levels a year ago. Industry official said that the results were to be expected, except for the 17.3% month-on-month drop in electronics.

Here in Cebu, the impending shutdown of electronics firm Celestica’s plant caused worries of other companies leading the same fate at the Mactan Economic Zone. Toronto-based Celestica, Inc., is pulling out of the Philippines in the face of weak electronics market and will instead focus its operations in China and Thailand. The shutdown will displace 800 workers. Furthermore, the lack of harvested mangoes in the country has slumped the growth for a Cebu-grown food processing player. The availability of raw materials to mitigate the low supply of harvested mangoes is the industry’s main limitation, according to IDEA. 

For credit & collection questions and inquiries, he can be reached at 0917-7220521 or email him at [email protected]