ADB sees 2.5% growth for RP in 2009
by KAREN FLORES, abs-cbnNEWS.com | 03/31/2009 12:45 PM
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The Asian Development Bank's (ADB) projection for Philippine economic growth in 2009 is lower than the government's own targets but more optimistic than the International Monetary Fund's.
In its annual economic publication launched on Tuesday, ADB said the local economy is likely to expand by only 2.5 percent this year due to weakened global demand for the country's goods and services.
ADB's 2009 projection is lower than the Philippine government's own estimate of at least 3.7 percent but higher than IMF's 2.25 percent .
ADB also noted that this year's sluggish growth is a sharp drop from last year's gross domestic product (GDP) growth of 4.6 percent and 7.2 percent in 2007.
It said that if the global economy and trade both rally by late 2010, then the Philippine's growth is expected to pick up at 3.5 percent by next year. The Philippines would hold its national elections in 2010.
"The political risk of disruptions to the 2010 elections cannot be completely ruled out. Also looking to next year, if the global economy does not pick up as assumed, the government will be hard-pressed to fund additional fiscal stimulus measures, given its budget constraints," the report said.
Average inflation is projected to moderate to 4.5 percent from 9.3 percent last year as a result of the economic slowdown and lower food and oil prices.
Consumer spending, though benefitting from the downward trend in inflation, is seen to grow by only 3 percent as remittance inflows are likely to flatten in US dollar terms with the weakening of labor markets worldwide.
Fiscal spending is expected to rise as it will pick up the slack in economic activities, with the country's budget deficit projected at 2.5 percent of GDP.
The ADB warned that fiscal slippage beyond this level may unsettle financial markets and ratings agencies, raising borrowing costs.
"Further increases in revenue as a share of GDP and reductions in debt would not only reduce vulnerabilities, but also build the fiscal resources required for development spending on infrastructure and on social programs," ADB Acting Chief Economist Jong-Wha Lee said.
The government aims to keep the budget shortfall at P177.2 billion or 2.2 percent of GDP.
For the first two months of 2009, the country already missed its deficit target and posted budget deficit of P67 billion ($1.38 billion), about double its goal for the period. In February alone, the shortfall reached P29 billion.
