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By Maricel E. Burgonio and Darwin G. Amojelar, Reporters
Credit rating firm Standard & Poor’s
(S&P) projected that Asian countries, including the Philippines,
are likely to sustain economic growth in 2008 and 2009.
For the Philippines, though, S&P forecast a
slump to 4.8 percent in 2008 from 7.3 percent in 2007. The country
could slightly recover to 5 percent in 2010, the credit rating firm
said.
S&P added that the credit perspective for
the Asian countries appears less favorable due to inflationary
concerns brought about by costlier basic commodities and oil
products.
Despite the high prices of food and oil, the
Philippine economy was likely to have grown at a moderate pace in
the second quarter of 2008, an official of the National Economic and
Development Authority (NEDA) said Wednesday.
“I’m probably looking at 5.7 percent [GDP
growth in April-May-June 2008],” Augusto Santos, NEDA’s deputy
director general, told reporters. GDP, or gross domestic product, is
the total value of goods and services produced in a country in a
year.
In its latest report released recently, Asia
Credit Comment: Can It Stay Above the Fray?, S&P said Asia is
expected to post GDP growth of 7.2 percent in 2008 and 7 percent in
2009.
“Even though Asia will continue to benefit
from higher economic-growth rates vis-à-vis its global
counterparts, regional-credit markets face headwinds from domestic
and external factors. These factors include inflationary concerns,
unfavorable interest rate dynamics, financial exposure and rising
import bill,” it added.
S&P said the outlook for interest-rate
dynamics in the region appears less favorable from a credit
perspective.
Inflation in Asia is forecast to increase to 6.7
percent in 2008 and drop to 4.6 percent in 2009, it added.
Inflationary pressure is driven by a combination
of cost-push factors, such as rising prices for oil, food and
commodities. It is also nudged on by demand pull, which stems from
strong growth in domestic demand and rapid credit expansion. Such
expansion remains solidly in the double-digit range for most Asian
countries other than Japan, the credit rating firm said.
According to S&P, inflation is likely to
reach 6.9 percent in 2008, which is below the central bank’s
projection of 9 percent to 11 percent.
It said inflation in 2009 is likely to drop to
4.5 percent, which is still below the central bank’s forecast of 6
percent to 8 percent.
S&P added that majority of countries in
Southeast Asia and South Asia have already begun stepping on the
monetary brakes to combat inflation threat. It mentioned Indonesia,
the Philippines, Thailand, Vietnam and India as having done so.
“To that extent that growth projections are
not significantly dented, inflation will continue to remain a focal
point of policy risk for central banks across the region,” S&P
said.
In addition to monetary restraint, the credit
rating firm said, rising fiscal pressure from subsidizing food and
fuel prices creates upward momentum for interest rates in Asia.
“The region’s net creditor status vis-à-vis
the rest of the world in terms of capital flows implies that
financial linkages run deep and could prove to be a source of
vulnerability,” S&P added.
Based on its monthly report of companies at risk
of potential downgrades, sectors with the highest count of issuers
with downgrade potential include utilities, banks and home
builders/real estate. About 60 firms were listed as candidates for
potential downgrades in the Asia-Pacific region and 30 companies
were for potential upgrade.
The Philippines’ National Economic and
Development Authority attributed the moderate growth in the second
quarter of 2008 to the business process-outsourcing (BPO), financial
and trade components of the services sector.
In the first quarter of 2008, the services
sector grew 6.9 percent from 8.4 percent. The industry sector also
expanded at a slower pace of 3.9 percent from 6.6 percent.
Agriculture, fishery and forestry slowed down too to 3 percent from
4 percent in 2007.
From January to March, the economy, as measured
by GDP eased to 5.2 percent from 7 percent during the same period in
2007.
For 2008, the Development Budget and
Coordinating Committee had revised the economic targets to 5.7
percent to 6.5 percent from the original forecast of between 6.3
percent and 7 percent.
A report from the National Statistical
Coordination Board said the composite leading economic indicator
(LEI) in the second quarter of 2008 went up to 0.566 from 0.455 in
the first quarter, pointing to a continuation of the economic growth
that experienced new highs in 2007.
The indicator serves as a basis for short-term
forecasting of macroeconomic activity in the country. It involves
the study of the behavior of indicators that consistently move
upward or downward before the actual expansion or contraction of
overall economic activity.
The statistical board said of the 11 indicators
that make up the composite indicator, seven contributed positively
to the indicator for the second quarter of 2008.
“The positive contributors, beginning with the
largest positive contributor, were stock-price index,
foreign-exchange rate, merchandise imports, wholesale-price index,
new businesses, terms of trade index and hotel occupancy rate,” it
added.
The government agency, however, said the
negative contributors, beginning with the largest negative
contributor, were consumer-price index, money supply, tourist
arrivals and electric-energy consumption.
The positive contributors accounted for 76.9
percent of total contribution, far outweighing the negative
contributors at 23.1-percent share, it added.
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