Deutsche Bank sees 2.8% GDP growth for RP this year

The country’s gross domestic product (GDP) is forecast to grow by 2.8 percent this year, according to global investment banker Deutsche Bank AG. This is slightly better than the 2.7-percent growth projected by the Asian Development Bank (ADB).

The Philippine government started the year with a GDP growth forecast of 3.8 to four percent which was trimmed down to 3.4 to 3.8 percent at the end of the first quarter. After the Sept. 11 disaster, government scaled it down further to three to 3.2 percent.

The German bank forecasts the Philippine economy to grow between four and five percent next year assuming that the US economy will start to recovery and the Japanese recession come to an end.

Deutsche Bank’s positive outlook on the Philippine economy is based on the sustained growth of the domestic economy as well as the ability of government to put a rein on its budget deficit.

"The domestic economy is insulated through the positive albeit modest growth of the agriculture sector and improving political stability. Growth will now be bouncing from the bottom (referring to the 2.8-percent GDP growth this year)," said Hubert Neiss, Deutsche Bank chairman for Asia.

More than one-third of the country’s workforce is agri-based while only 10 percent of the workforce can be traced to the manufacturing sector. "So domestic consumption growth does not fall as much as it does in more industrialized economies."

The bank said that to achieve a five-percent growth next year, the peso must be allowed to find its true value while government should introduce new fiscal policies that would create stability in the financial markets.

"Government should also reduce or remove premiums on dollar bonds and foreign currencies. And it should review or reinvent new incentives for fiscal and financial markets," it added.

However, bank executives expressed concern over the monetary authorities’ insistence on maintaining high interest rates.

Interest rates remain in double digit levels for three-month interbank lending, hitting 13.6 percent in early November. It is forecast to move upwards to 15.0 in the next three months and to 15.5 percent within the next six months.

In contrast, Thailand is forecast to grow by five percent next year while the bath will remain strong at 44.60 to the dollar. Its three-month interbank rate is seen to hover at the 2.7 percent level in the next three to six months.

Malaysia is expected maintain interest rates at 3.3 in the next six to eight months while the ringgit remains strong at 3.80 to 3.83 to the dollar.