Economists hike anew GDP growth forecast for this year

MANILA, Philippines - Economists upgraded the country’s gross domestic product (GDP) growth outlook as economic output continued to grow at an exceptional speed while inflation continued to stay lower-than-expected.

In a report, New York-based think tank Global Source Partners upgraded the country’s 2010 GDP growth outlook to 6.8 percent from the original six percent but retained next year’s GDP growth projection at 4.7 percent.

“Economic momentum seems unlikely to wane significantly this year, with growth apt to settle between 6.5 percent and seven percent based on our estimates,” former Finance Undersecretary Romeo Bernardo and economist Margarita Gonzales said.

The country’s GDP grew by 7.9 percent in the first half of the year from 1.2 percent in the same period last year but economic managers through the Development Budget Coordination Committee (DBCC) only upgraded the GDP growth forecast to five percent to six percent instead of 2.6 percent to 3.6 percent this year.

Economists and analysts expect the country’s GDP growth to slow down in the second half of the year.

“First-half growth came in at a rather high 7.9 percent and while leading indicators signals a deceleration in the succeeding quarter this will probably not be abrupt,” Bernardo and Gonzales added.

Global Source cited the decision of multilateral lending agencies such as the International Monetary Fund (IMF) to hike the country’s GDP growth projection to seven percent from six percent and the World Bank to 6.2 percent from 4.4 percent this year on the back of the strong personal consumption and robust export earnings.

However, the think tank believes that the country’s strong GDP growth would not be sustained until next year as the robust exports would eventually lose speed.

“While phenomenally strong growth seems to be a foregone conclusion this year, we still do not see the pace continuing in 2011, leaving our forecast unchanged at 4.7 percent,” it added.

According to Global Source, the strong peso would bring down the remittance growth in peso terms and serve as a dampener to private spending while significant gains from election-related and typhoon reconstruction spending would be gone next year.

Likewise, the think tank lowered its inflation forecast to 3.8 percent from four percent this year and from 4.1 percent next year due to stable oil and commodity prices.

Last Oct. 7, the Bangko Sentral ng Pilipinas (BSP) decided to further lower its inflation forecast to 3.5 percent instead of four percent this year and to three percent instead of 3.25 percent next year in light of the slower-than-expected inflation of 3.5 percent in September.

The BSP has set an inflation target of 3.5 percent to 5.5 percent this year and three percent to five percent between 2011 and 2014.

On the other hand, Metrobank’s First Metro Investments Corp. (FMIC) and University of Asia and the Pacific (UA&P) said the country’s GDP growth would still be above seven percent this year after slackening to 1.1 percent last year from 3.8 percent in 2008 due to the full impact of the global economic meltdown.

In the latest edition of Market Call, FMIC and UA&P said the GDP would slow down in the second half of the year after expanding by 7.9 percent in the first half of the year.

They added that the country’s GDP expansion would not fall below six percent in the third and fourth quarters of the year after growing by 7.8 percent in the first quarter and 7.9 percent in the second quarter.