[ Manila Bulletin Online ] February 14, 2009
By ROSEMARIE FRANCISCO
Growth in the Philippines will likely slow to 2 to 3 percent this year, lower than government forecasts, as remittances from overseas Filipinos decline and dampen consumption, credit rating firm Moody’s Investors Service said.
The government expects the economy to grow at least 3.7 percent this year after a 4.6 percent expansion in 2008.
"We think it will be below the government forecast,’’ Tom Byrne, a Moody’s senior vice president told Reuters regarding growth this year. "We think it will probably be between 2 and 3 percent.’’
Byrne said Moody’s would hold its next ratings review of the Philippines in three to six months, rather than one year from now, due to uncertainty about the country’s economic outlook linked to the global downturn.
Moody’s affirmed on Thursday its positive outlook on the Philippines’ credit ratings. It ranks the country’s sovereign debt at four notches below investment grade.
Remittances, equivalent to more than a tenth of domestic output and a major driver of consumption, are expected to drop 5 to 10 percent this year as a slowing global economy puts pressure on wages of Filipino workers abroad, Byrne said.
"It’s one of the biggest risks,’’ he said on remittances.
"It’s real important to the balance of payments, to economic growth, to household consumption, even residential investment and also to the stability of the peso, which is a key thing.’’
The possible drop in remittances, a reversal of about 15 percent growth based on the latest data for the first 11 months of 2008, may depress the local currency, he said.
"Looking at the year as a whole, we would expect the peso to weaken,’’ Byrne said. ‘’Let’s say workers’ remittances collapse in the first half of this year, then there would be an effect on the peso.’’
But the country’s external payments position was likely to remain in surplus this year as an expected plunge in the import bill due to falling oil and commodity prices provides a cushion to the balance of payments (BOP) and the current account.
The Philippines was the world’s biggest rice buyer last year when the price of the grain hit record highs. It also imports almost all of its crude oil needs.
Byrne said the government’s plan to pursue more foreign financing via loans from development lenders such as the World Bank and Asian Development Bank could also help prop up the BOP, which fell to million surplus last year -- a 4-year low.
On Wednesday, central bank Governor Amando Tetangco forecast the BOP surplus to come in above 0 million but below billion this year.
The Philippine government, reacting to Moody’s affirmation of its outlook, said it would aim to boost its finances by improving tax collection and seeking additional tax revenues.
‘’We are pleased with this vote of confidence from Moody’s especially since it comes amid these challenging times,’’ Finance Secretary Margarito Teves said.
‘’We will endeavour to further increase revenues to help us improve our credit ratings,’’ Teves said.
Byrne said the government would likely have difficulty in convincing Congress to pass additional revenue measures amid a deepening global downturn, but such measures would put the country in better shape to take advantage of a rebound in the world economy later. (Reuters)
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