HSBC ups RP growth forecast to 1.8% this year, 4.2% in 2010

MANILA, Philippines - The Hongkong Shanghai Banking Corp. (HSBC) upgraded yesterday its 2009 and 2010 economic growth forecasts for the Philippines as Asian economies are set to lead global economic recovery.

In a report titled “Emerging Markets Index” HSBC said that the country’s gross domestic product is set to expand by 1.8 percent instead of one percent this year and by 4.2 percent instead of three percent next year.

HSBC’s GDP growth forecast for the Philippines is at the high end of the government’s projection of 0.8 percent to 1.8 percent this year.

The country’s GDP growth slowed down to one percent in the first half of this year from four percent last year.

The Philippines avoided a recession after it posted a stronger-than-expected GDP growth of 1.5 percent in the second quarter after a dismal 0.6 percent expansion in the first quarter of the year.

China is expected to lead the emerging markets with an 8.1-percent GDP growth this year followed by India with 6.2 percent, Sri Lanka with four percent, and Australia with 0.8 percent.

“Emerging markets continue to power the growth in the global economy,” HSBC Group chief executive officer Michael Geoghegan said in the report.

However, HSBC believes that the Philippines would fall behind its neighbors in Southeast Asia in terms of GDP growth next year.

The country’s projected GDP growth of 4.2 percent would be lower than Vietnam’s 6.8 percent, Malaysia’s 6.8 percent, Singapore’s 6.5 percent, Thailand’s 4.5 percent, and Taiwan’s 4.4 percent.

HSBC also revised its inflation forecast this year due to easing consumer prices. It expects inflation to average 3.2 percent instead of 3.5 percent this year but kept its inflation projection of 4.8 percent for next year.

Inflation averaged 3.4 percent in the first nine months of the year from 9.2 percent in the same period last year. Consumer prices rose to 0.7 percent in September after easing for six straight months to a 20-year low of 0.1 percent in August.

HSBC expects the peso to strengthen to 46 to $1 by the end of 2009 and improve further to 43.50 next year. Policy rates are also exfected to remain low this year. – With Ted Torres