PH to grow 5%-6%: bank analyst

Thursday, October 27, 2011

DESPITE economic woes in Europe and the United States, the Philippines is still poised to grow by five to six percent between this year and 2012. The country is buoyed by its strong market fundamentals, according to forecasts of the Banco de Oro Universal Bank (BDO).

“We are quite optimistic (with the forecast) but it would be a challenging quarter. This would depend on how the government would institute and aid processes in trying to keep the growth targets,” said Jonathan Ravelas, BDO first vice president and chief market strategist in an economic briefing last Wednesday.

Learn what's new in CEBU now, click here

Ravelas said the growth target is attainable despite the troubled economies of Europe and US. He pointed out that the Philippines has the right market fundamentals which the government could bank on to sustain growth.

“We have a stable exchange and interest rates. Our budget deficit is no longer a problem as we are now starting to see revenues in the government. What the country needs are additional growth drivers,” he said.

Investment

Ravelas suggested that government invest heavily in infrastructure, focus on low energy cost and streamline business processes so it could attract more investments, generate more jobs and increase consumer consumption.

“The challenge now is to mobilize the ample liquidity and take advantage of the low interest rate environment,” he said.

Ravelas reported that there is so much domestic liquidity that can be used to fund big ticket infrastructure and the Aquino administration’s private-public partnership initiatives, but he pointed out that the government should streamline first its processes and identify priority programs.

BDO also forecast inflation to end at 4.7 percent this year. Ravelas warned that the recent calamities in Vietnam and Thailand might affect commodity prices and result in “supply battle” similar to what happened in Japan last March. He noted, however, that the inflation rise is temporary and manageable. The country’s inflation is projected to go down 4.5 percent in 2012.

Ravelas also encouraged consumers to take advantage of the low interest environment.

“Now is the time to borrow,” he said, adding that the current interest rate may stay for at least a year just to facilitate growth but might increase by 2013 or 2014.

Foreign exchange rate, on the other, hand might settle at P38-39 to a dollar over the next two years due to problems in Europe.

“We are looking at a P43.80 to a dollar by the end of the year depending on how Europe will play-out over the next two weeks,” he said.

Ravelas pointed out that an important indicator for recovery is the fourth quarter, when the country expects a surge of remittances, and the purchasing power of Americans and Europeans during the holidays.

He identified agribusiness, consumer durables, construction and real estate, education, health, beauty and wellness; infrastructure, IT-enabled and IT services; logistics and retailing; transport, telecommunications and tourism as “sunrise” industries.

Ravelas admitted, the jobless recovery in the US, debt crisis in the eurozone, Middle East and North African crises and the rising inflation in emerging markets are the challenges to sustain growth.

The global growth rate is forecast to slow down to four percent, he said.

Competitiveness

Meanwhile, Canadian Chamber of Commerce of the Philippines president Julian Payne said that for the country to maximize its growth potential, it should improve its competitiveness.

“The Philippines is in a wonderful position in terms of remittances. It is well protected because of the overseas workers’ diversification. However, as much as the country needs more foreign direct investments (FDIs), it should also improve its ability to compete with neighboring countries,” Payne said.

He said FDIs are needed because they bring in technology and additional money to the country.

“FDIs are here to stay provided that the government will implement the right policies and avoid changes in the middle of the game,” Ravelas said.

Published in the Sun.Star Cebu newspaper on October 28, 2011.