RP to keep pace with Asian economies next year - banker

MANILA, Philippines - The Philippines is seen to keep pace with other Asian economies next year, the region that is perceived to lead the global recovery, a bank economist said.

Jonathan L. Ravelas, chief market strategist of Banco de Oro Unibank Inc. (BDO), said the crucial point is “the government’s timely intervention to mitigate possible food shortage (especially rice) given the damage to agricultural land. Ravelas pointed out that the government however has secured its rice requirements for 2010 to take advantage of better prices ahead of the tightness in supplies next year.

The two significant factors weighing down on stronger growth is the negative impact of typhoons Ondoy (Ketsana) and Pepeng (Parma), and the possible occurrence of the El Niño weather phenomenon next year.

 “Interest rates are seen to stabilize but upward pressure remains due to recurring fiscal concerns and increased borrowings to finance growth amid a rising inflation outlook from pump-priming measures and election-related expenditures,” Ravelas said.

Rates are forecast to remain depressed at 4.5 percent this year, from 6.1 percent in 2008, then inch up to five percent in 2010 and to 5.5 percent the following year.

The Bangko Sentral ng Pilipinas (BSP) is expected to keep policy rates at four percent this year from 5.5 percent in 2008.

The peso will likely strengthen to 47.25 to the dollar this year and gain momentum to end the year at 46 to $1 in 2010. While the US economy slowly gains confidence from the world market, the peso will remain strong at 44.50 to the dollar in 2011.

“The balance of payments (BPO) is expected to post a higher surplus, fundamentally supported by remittances, increased capital inflows, and revived exports. Gross international reserves should remain in record levels, adequately covering import requirements,” the BDO executive added.

The Philippines is expected to benefit from increased capital flows on diminished risk aversion to emerging economies, benefiting the stock market. The Philippine Stock Exchange index (PSEi) has been testing the 3,100-resistance level, and the prospect of its reaching previous record levels of 3,600 is not farfetched next year.

Foreign direct investments (FDIs) are expected to gain momentum after the elections as the new government bares its economic growth agenda for the next six years.

“Sustainable growth going forward will depend on higher level of investments that generates more employment opportunities and multiplier effects. Private sector leads in tapping opportunities as government stimulus programs end,” Ravelas added.