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THE Philippine economy is expected to remain strong over the next
two years, driven by private consumption and inflows of remittances
from Filipinos working overseas, the Economist Intelligence Unit (EIU)
said.
In its latest report, the EIU forecast
that economic growth, as measured by the country’s gross domestic
product (GDP), will average 5.2 percent this year and 6.9 percent in
2009.
“This follows unusually strong GDP growth of
7.3 percent year on year in the first half of 2007 (including an
increase of 7.5 percent in the second quarter),” the report read.
The main engine of the economy will remain
private consumption, EIU said. “This will continue to be supported
by booming inflows of remittances, which are experiencing strong
growth owing to the large number of overseas Filipino workers.”
It, however, said worries about political
instability may act as a restraint on consumption.
EIU said investment is forecast to record
respectable growth over the forecast period owing to higher
government spending, low interest rates and an improvement in
banks’ balance sheets, which should increase their willingness to
lend.
Despite the forecast pick-up, it also said the
country’s poor infrastructure and business operating environment
will continue to hold back investment. But a relatively good fiscal
outlook, with the budget deficit forecast to continue falling, will
give the government some room to lift spending in order to support
the economy.
“Owing to the relatively low ratio of
government spending to GDP, higher expenditure will provide only a
small boost to the economy. Net exports, which have provided a
strong boost to growth over the past couple of years, will act as a
drag on economic growth in the early part of the forecast period, as
exports slow significantly in 2008 in line with a slowdown in US
growth,” the report said.
In the first nine months last year, the
Philippine economy grew by a record seven percent, fueled by strong
consumer spending and the services sector.
The Bangko Sentral ng Pilipinas expects the
economy to have expanded by seven percent, or higher than the upper
end of the government’s target.
A looming slowdown in the US economy however has
raised doubts about the Philippines replicating last year’s
economic performance in 2008.
-- Chino S. Leyco
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