Philippine Economy 2009 Growth Revised Upwards by World Bank and Also 2010

A rebound of consumer spending in the Philippine economy 2009 due to continuing increase in remittances by overseas Filipinos as well as timely implementation of monetary and fiscal stimuli prompted the World Bank (WB) to revise upwards its growth forecast for the Philippines to 1.4 percent in 2009 and 3.1 percent next year.

Both figures reflect improvements from the lenders’ earlier 0.5 percent and 2.4 percent growth projections for the country for this year and 2010, respectively.

WB Philippines senior economist Eric Le Borgne, in a briefing said the new forecasts were made amid the impact of the calamities that hit the country recently.

“Continued deployment of overseas Filipino workers results in the strong inflows of remittances,” he said during the simultaneous launch of the Philippines Quarter Update (PQU) 2009 and the East Asia and the Pacific Economic Update in Makati City.

The WB now projects remittance inflows from overseas Filipinos (OFs) to grow by four percent with a net positive impact on the Philippine economy 2009, similar with the projection of the Bangko Sentral ng Pilipinas (BSP), from the previous forecast of four percent contraction.

The PQU said remittances continue to post growth and even registered 9.3 percent year-on-year gain last July before dipping by 2.8 percent in August.

“However, in real Peso terms, they actually rose by 12.1 percent in the first eight months of 2009, against a 2.9 percent contraction in the same period of 2008, with a positive effect on the Philippine economy 2009” it said.

Citing the PQU, Le Borgne said the business process outsourcing (BPO) sector greatly benefits from the crisis.

“The global BPO sector is strategically looking for a back-up to India, and the Philippines seems to have established itself as the preferred choice, given comparable cost, language, and technical skills, thereby firmly establishing its relatively new industry on the global map,” the report said.

Le Borgne explained that although BPOs contribution to poverty alleviation in general is indirect as most workers employed here are young people, its contribution to government revenues and the Philippine economy 2009 is high.

Relatively, the WB economist cited the signs of recovery in the export and corporate sectors.

He said exports from the Philippine economy 2009, to major economies like the United States and Germany have improved since last August.

He also noted that the “corporate sectors focusing on the domestic market is showing improved profitability” amid the continued slump of the small and medium enterprises involved in exports.

“While financial markets are also on the rebound, banks are able to turn around losses experienced in the last quarter of 2008,” Le Borgne said.

On monetary policy, he said central bank officials should remain cautious on their policy stance in relation to increasing asset prices.

The PQU said the impact of the 200 basis points cut in the central bank rates from December 2008 to July 2009 is “expected to continue for the next few months given the policy lag.”

BSP implemented a series of rate cuts as inflation continued to decelerate after surging to 12.5 percent in August 2008.

Inflation dipped to its lowest level this year at 0.1 percent last August and went up to 0.7 the following month due to continued increase in prices of oil products in the international market and the diminishing effects of last year’s high inflation rates.

BSP maintained the record-low overnight borrowing rate of four percent and overnight lending rate of six percent last August and October after six consecutive rate cuts.

“However, with bank lending rates having only partly matched the BSP rate cuts -– lower by only 127 basis points –- and with the lending rate cuts broadly stopping in April, the actual easing for the Philippine economy 2009 has been significantly lower and stopped relatively rapidly,” the PQU added. (PIA)

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