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By Maricel E. Burgonio, Reporter
The government’s growth
forecast was bolstered Tuesday, when the Hongkong and Shanghai
Banking Corp. (HSBC) announced that it sees the country’s gross
domestic product going up to 6.5 percent this year.
The HSBC outlook is within the
government’s GDP forecast of between 6.1 percent and 6.7 percent.
If realized, the figure would be an improvement over last’s year
GDP of 5.4 percent.
However, Frederick Neumann, an
economist with HSBC, said the GDP is seen to decline to 5.4 percent
next year and slightly improve to 5.5 percent in 2009 because of a
rising inflation rate and reduction in consumption spending.
Inflation is projected to
increase 4.2 percent next year and 4.8 percent in 2009 from 2.7
percent this year.
“Remittances and private
consumption are boosting the economy, but if they fall, we’ll see
a slowdown in economic growth for the meantime,” he said.
Remittances by Filipino workers
may grow by 10 percent to $14 billion this year from $12.9 billion
this year, according to the Bangko Sentral ng Pilipinas.
In the second quarter of the
year, the GDP posted remarkable growth of 7.5 percent compared with
the same period the year before, because of an increase in
infrastructure development, remittances and investments.
The Philippines is expected to
post the fourth-highest GDP growth in Asia next to Vietnam, which is
expected to grow 8.2 percent this year and next year.
Neumann said exports growth will
remain in single digits at 5.5 percent this year and next year. The
figure will improve to 6 percent in 2009, he added.
“Softer US demand may yet hit
electronic exports. However, less dependence on export growth leaves
the Philippines less exposed to US downturn,” Neumann said.
Central bank cuts interest rates
The central bank is expected to
cut its interest rates by 25 basis points before yearend, Neumann
said. “The cut in the [US] Fed rate made it easier for the BSP to
do it,” Neumann added.
He said the central bank is
forecasted to reduce its rates to 5.75 percent in 2007 but will
increase it to 6 percent in 2008 and 6.5 percent in 2009.
Meanwhile, the Monetary Board is
scheduled to meet today. Neumann said, “There’s a good
possibility they may lower the rates. They have to find a way to
bring it down because it is costly.”
In the last policy meeting in
July, improvement in bank lending growth and reduction in domestic
liquidity growth has prompted the central bank to reduce its
key-policy rates and lift the tiering scheme on banks placements.
Domestic liquidity or M3 growth
slowed down to 14.9 percent year-on-year in August from 18.7 percent
in July this year.
The Monetary Board cut its
overnight borrowing or reverse repurchase rate to 6 percent from
7.50 percent while overnight lending or repurchase rate went down to
8 percent from 9.75 percent.
For the peso, Neumann said it’s
seen to average P45.6 against a dollar and further improve to P42.3
next year and 40.6 percent in 2009.
“The peso will continue to grow
because remittances will continue to pour in to the country.” The
ability of central bank to buy dollars is limited, he added.
In Tuesday the peso closed
slightly weaker on profit taking as the market highly supported
P44.70. At the Philippine Dealing System, the peso appreciated
slightly to P44.915 against a dollar from P44.850 on Monday.
“There is a recovery in the
stock market flows, about $500 million for foreign investors,”
Marcelo Ayes, Rizal Commercial Bank Corp. vice-president, said.
The peso is seen to reach P44.80
to P45 this week and is forecast to appreciate because of expected
strong remittance flows starting October 15. the peso opened P44.740
and traded to a high of P44.930 and low of P44.740. Total volume
turnover reached $478.370 million.
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