Economy to grow faster this year - BDO

CLARK FIELD, Pampanga (via Wi-Tribe), Philippines – BDO Unibank, Inc., the country’s largest lender in terms of assets, expects the economy to grow faster this year while interest rates will remain low and inflation manageable.

Benefits of the higher government spending will likely take effect late this year that will increase consumption spending.

Growth in gross domestic product will likely reach 4.5 percent this year from 3.7 percent last year, Jonathan L. Ravelas, chief market strategist at BDO Unibank, Inc., said at the Economic Journalists’ Association of the Philippines-San Miguel Corp. Business Journalism Seminar in Pampanga.

The projection is lower than the government budget assumption of a 5.5-percent uptick.

Ravelas said the economic scenario will be like last year, with numerous factors that could dampen growth.

“All the problems are still here. Who is next [in the Eurozone debt crisis]? For the US, we are not sure because their recovery stems from the fourth quarter so it is all about spending during the Christmas,” Ravelas said.

“The good thing about our country is it signals spending. In the second half, we will see the rewards of these things,” Ravelas said.

The government has set a budget deficit ceiling of P286 billion this year. Last year, the government incurred a deficit of P197.8 billion, below the P300 billion deficit ceiling set for 2011.

Meanwhile, BDO Unibank projects inflation and interest rate of three-month Treasury bills to average at 4.5 percent and three percent, respectively, from 4.7 percent amd 1.66 percent last year, respectively.

The government expects inflation to average three percent this year.

But a spike in oil prices might dampen economic growth, Ravelas said.

“If Iran is to be attacked, it will trigger $140 per barrel,” Ravelas said.

Dubai crude, the benchmark for Asia, stood at $123.10 per barrel as of March 21, up from $122.15 per barrel as of Mar. 16.

International oil prices remain high given continued tensions over nuclear program of oil producer Iran.

Ravelas said $120 to $130 will be manageable, with oil prices to normalize at $100 by yearend.