DBS downgrades 2009 growth forecast for RP
abs-cbnNEWS.com | 12/18/2008 11:40 AM
Printer-friendly version | 
Send to friend | 
Share your views
Singapore-based DBS Bank Ltd. has downgraded its economic growth outlook for the Philippines in 2009 as the effects of the global financial crisis begin to trickle down to the real economy.
In its quarterly Economics Markets Strategy report, DBS said the Philippines' gross domestic product (GDP) expansion could slacken to 3.8 percent next year from 4.7 percent this year. The investment bank earlier forecast the country's GDP to grow by 5.5 percent in 2009.
"In the quarters ahead, as the real economy effects of the global credit crisis start to be felt, it is likely that the Philippines economy will lose further traction…By 2009 we can expect the economic slippage to become much starker," it said.
The new forecast is within the government's revised projection of 3.7 to 4.7 percent GDP growth next year.
For 2008, DBS said the economy would likely expand by 4.7 percent instead of its previous estimate of 5.0 percent. GDP hit a 31-year peak of 7.2 percent in 2007.
DBS maintained a cautious export outlook for the Philippines given that its four major markets – US, Japan, Hong Kong, and Netherlands – are in recession. DBS said, however, an increase of 4.2 percent in dollar earnings could support export growth.
The investment bank said inflation is expected to ease sharply to about 2.6 percent next year from 9.6 percent this year due to stable oil and food prices.
"With the economy having more to spare, and both soft and hard commodity prices having returned to earth, inflation is headed further south in the coming quarters," said DBS.
Thus, it noted, the central bank would have more room for a stimulative monetary and fiscal policy next year and could slash its key interest rates by 100 basis points.
Since June, the central bank has jacked up its policy rates by 100 basis points, bringing the overnight borrowing rate at 6.0 percent and the overnight lending rate at 8.0 percent.
Meanwhile, DBS said the country's budget deficit would balloon further next year due to the 2010 Presidential and national elections. The government expects a budget shortfall of P102 billion or 1.2 percent of GDP in 2009 from P75 billion or 1.0 percent of GDP in 2008.
