US think-tank sticks to 4.8% growth forecast for the Philippines

New York-based Global Source Partners is sticking to its revised gross domestic product (GDP) growth of 4.8 percent this year despite the economic slowdown experienced by the country in the first quarter of the year.

In its latest market brief entitled “Philippines: Facing Stronger Head Winds,” Global Source said its still expects the country’s domestic output as measured by the GDP expanding by 4.8 percent this year despite the lethargic economic growth in the second quarter as shown by leading economic indicators released by the National Statistical Coordination Board (NSCB).

“At this time, we are still sticking to our projection of 4.8 percent growth for the year, though it is obvious the economy now confronts stronger head winds. As we previously reported, the leading economic indicators index released by NSCB suggests an increased lethargy in the economy in the second quarter,” Global Source stated in the report.

Socioeconomic Planning Secretary Cayetano Paderanga reported last week that the country’s GDP expansion slowed down to 4.9 percent in the first quarter of the year from the revised 8.4 percent in the same quarter last year due to modest government spending and a slowdown in global trade.

The actual GDP from January to March was within the lower end of the GDP growth forecast of 4.8 percent to 5.8 percent set by the National Economic and Development Authority (NEDA) for the first quarter.

“GDP grew by 4.9 percent in the first quarter 2011, in line with our expectations as reflected in the previous quarterly outlook, and just barely hitting the tail end of the government’s 4.8 percent to 5.8 percent forecast,” the report added.

It explained that the GDP growth in the first quarter was the lowest since the fourth quarter of 2009 and continues a trend of declining growth since the first quarter of 2010.

“As we predicted, a slowdown in government spending compared to the pre-national election quarter last year, as well as lackluster trade due to rising oil prices stemming from the political turmoil in Middle East and North African (MENA) states, were cited as the main culprits for the lower growth,” it said.

Global Source originally projected the country’s GDP growth slowing down to 5.4 percent this year but lowered the growth forecast to 4.8 percent last month.

The think tank said the tensions in the MENA region and the disasters in Japan would result to lower personal consumption.

“Additionally, the woes in MENA combined with the continued sluggishness in Europe, point to remittances remaining relatively flat in the short term, indicating it may just be a matter of time before it starts dragging down personal consumption,” Global Source added.

The Philippines posted its strongest growth in 34 years after its GDP growth expanded by 7.6 percent last year after slackening to 1.1 percent in 2009 from 3.8 percent in 2008 due to the full impact of the global financial crisis.

Earlier, BSP Governor Amando Tetangco Jr. said monetary authorities see the country’s economy growing slower than expected this year due to the political tensions in the MENA region as well as the disasters that struck Japan last March.

“We think the economy will continue to grow this year. The government is projecting seven percent to eight percent although that projection was arrived at prior to the events at the MENA region as well as the earthquake, the tsunami and the nuclear disaster in Japan,” Tetangco stressed.

The BSP chief said the country’s inflation is likely to peak either in the second quarter or third quarter of the year amid the escalating prices of oil and commodities in the world market.

In fact, the BSP sees inflation this month exceeding the higher end of the central bank’s three percent to five percent target on the back of the seasonal increases in school supplies in light of the opening of classes in June, remaining adjustments in taxi fare, and the impact of the Aquino administration’s fuel subsidy program