Metrobank sees 6.5% GDP growth

MANILA, Philippines - Metropolitan Bank and Trust Co. said it sees the Philippine economy growing at about 6.5 percent this year.

A report by the bank’s research team said the gross domestic product (GDP) growth would be supported by solid consumption spending, higher government spending, and favorable outlook for the real estate and tourism sub-sectors.

This growth rate, however, is slower than the 7.5 to eight percent forecast made separately by its investment house, First Metro Investment Corp.

Metrobank’s research team said it also expects inflation to be slightly higher at 3.6 percent this year, from 3.2 percent last year, on tight supply in some commodity sectors.

The stronger peso and stable global commodity prices will keep inflation manageable, it said.

Metrobank is likewise projecting the country’s interest rates to remain subdued on rosy economic prospects, high market liquidity, expectations of credit rating upgrade and manageable inflation.

It said the peso will continue to strengthen this year, likely closing 2013 at 39.40 to the dollar.

This exchange rate assumption took into consideration  the strong appreciation bias for Asian currencies, including the peso, and external jitters which could still bring the local currency under pressure.

The Philippine economy posted a stellar third quarter growth of 7.1 percent in 2012, the fastest in the ASEAN region.

“Growth was driven by solid consumption spending, increased government spending, revitalized industry sector, and significant improvement in external trade,”  Metrobank said. Average GDP growth for the first three quarters of the year is at 6.5 percent.

Moreso, inflation in December slightly inched up to 2.9 percent from 2.8 percent in November. The uptick was mainly attributed to high seasonal demand for food amid some supply disruptions.

Lower electricity rates offset higher food prices. Full-year average is at 3.2 percent, well within the target range for 2012.

In its last meeting for 2012, the Monetary Board (MB)decided to keep policy rates steady at 3.5 percent (RRP) and 5.5 percent (RP) after slashing rates a cumulative total of 100 basis points since the start of the year.

The MB said the benign inflation outlook and robust domestic growth provide adequate room to keep policy rates unchanged.

Another highlight of 2012 was that the NG incurred a fiscal deficit of P127.3 billion in January to November, 32 percent higher than the deficit recorded in the same period last year. The figure is only 46 percent of the programmed 2012 ceiling.

“The spillover effects of the dragging saga of the euro zone crisis are expected to persist this year as current policy stances continue to fall short of what is needed to prevent further weakening of economies,” Metrobank said.