RP likely to avoid recession - Banco de Oro

By Iris C. Gonzales Updated March 28, 2009 12:00 AM

MANILA, Philippines - The Philippines may avoid a full-blown economic recession but may experience a marked slowdown due to the developments in the global environment, Banco de Oro’s chief market strategist Jonathan Ravelas said.

He noted risks to the economy such as a decline in business spending, global investments, dollar remittances from overseas Filipino workers and export earnings.

Nonetheless, he expects some sectors to remain strong given their resiliency. These are power and energy, food, healthcare, infrastructure and business process outsourcing.

“However, some sectors like electronics, property, automobile and tourism will be negatively affected,” Ravelas said.

BDO expects the economy, as measured by gross domestic product (GDP), to grow at around four percent, aided by increased government spending necessary to pump-prime a slowing economy.

The bank’s economic growth projection is within the government’s revised GDP target range of 3.7 percent to 4.4 percent.

In terms of inflation, Ravelas said this could hover at around 6.75 percent, higher than the government’s inflation forecast of three percent to five percent for 2009.

For the local equities market, he said the direction of the stock market is still very ambiguous.

“The outlook for our stock market in 2009 is not as easy to predict as in the earlier years of this decade. Thus year 2008 was a year of reversals. A reversal, by my definition, is when bullishness starts gaining momentum and suddenly crests at a certain point. After which, downside targets are being lowered and lowered, then suddenly a sharp rally occurs,” Ravelas said, noting that the market at present doesn’t have a trend.

Currently, the stock market, as measured by the Philippine Stock Exchange index is at the 1,525 to 1,650 levels.

“Given the risk aversion sentiment dominating the markets, going beyond 2,500 is doubtful. Any rally will be susceptible to sell-offs since we are in the cycle where news will be interpreted negatively. It is in those sell-offs where the best returns can be achieved by positioning for the inevitable bounce,” he said.

Ravelas expressed hopes that the Philippines will survive the global financial turmoil as it survived the 1997 Asian Financial Crisis.