Growth will remain solid this year – Tetangco

MANILA, Philippines - Economic growth will remain solid this year led by an “encouraging” first quarter performance that is expected to show domestic demand as well as external trade contributing to economic expansion, Bangko Sentral ng Pilipinas (BSP) Governor Amando Tetangco said.

“The macro financial numbers (last year) provide us some momentum. Nothing in the first quarter gives us reason to take pause,” Tetangco said.

“Instead, the outlook continues to be encouraging,” Tetangco told Filipino-Chinese businessmen in a speech last Friday. Copies of the speech were sent to reporters yesterday.

Sustained consumer demand bolstered by remittances will keep the Philippines afloat, but at the same time, a “more pronounced” trade sector will be a factor for this year’s economic momentum.

Econoic growth hit 6.6 percent last year, surpassing the government’s five to six-percent target, and becoming Asia’s second strongest expansion for 2012. A higher six- to seven-percent goal was set for 2013.

There are enough reasons to be optimistic about this year, Tetangco said, noting that the “sustained and broad-based” growth last year was supported by “broadening” growth drivers.

For one, there are the remittances from over 10 million Filipinos abroad, which are expected to continue flowing to the economy and providing resources to meet our external obligations.

The country’s balance of payments (BOP) is “seen to remain in surplus” after recording an excess of $9.236 billion last year. As of February, the BOP registered a surplus of $1.083 billion. The BSP expects the BOP hitting $3 billion this year.

On the other hand, overseas remittances, which posted a record of $21 billion last year, will be a “steadying factor” to boost our gross international reserves (GIR). Reserves are forecast to hit $86 billion this year.

Exports are likewise expected to recover despite a 2.7-percent contraction in January. “We anticipate a more pronounced contribution from the external trade sector,” he added.

Risks, however, remain, he stressed, and that the economy’s “resilience” will be tested by “continuing volatilities” abroad, particularly emanating from weak US and Europe economies.

Tetangco said the central bank has remained watchful of capital inflows from these economies on fears they may create imbalances. On a positive note however, the peso will remain “well supported” by these flows.

The central bank reiterated it could keep interest rates low for as long as the slow inflation permits. Consumer prices rose 3.2 percent as of February, well-within the official three- to five-percent target for the year.

“Financial stability means that we will continue to set monetary policy with an inflation anchor that is consistent with the needs of the broader macroeconomy,” Tetangco said.