UBS revises 2010 RP growth forecast to 7.3%

UBS Investment Bank on Tuesday revised its Philippine economic outlook, saying the Southeast Asian nation would likely post 7.3 percent in terms of growth in gross domestic product for the year because of stronger-than-expected performance in the first half. "The Philippine economy bounced into the first half of 2010 at a greater pace than we expected. We revise our 2010 real GDP growth forecast up to 7.3 percent (previously 5.5 percent)," UBS economist Edward Teather said in a report in the Southeast Asian Focus, called Philippines: Sweet Spot. A division of Basel and Zurich, Switzerland-based UBS Group, the bank said that Philippine domestic output was driven by a recovery in the industrial sector and supported by a surge in the service sector that benefited from election-relation spending early this year and the recovery efforts from the destruction wrought by tropical cyclones Ondoy and Pepeng late last year. Teather said the Philippine GDP growth forecast was revised after the economy grew by 7.9 percent in the first half of the year –the strongest since 1989. However, Teather warned of a possible slowdown in the export sector that has been reeling from the effects of the global financial crisis. This would likely be evident in the second half, bearing on the manufacturing sector. "Moreover, with the election and post-flood recovery largely over, it is likely that the boost to growth in the first half of 2010 from these factors will fade during the second half," he said.. He explained that the Philippines would likely experience a slower GDP growth in the second half, with its impact more salient in the macroeconomic performance next year that the bank shaved its 2011 GDP growth forecast target to 4.4 percent from of 4.6 percent. "All this leaves us looking for slower growth in the second half of 2010 and into early 2011, after a strong first half 2010. This we reflect by revising our 2010 real GDP forecast to 7.3 percent (previously 5.5 percent), while revising the 2011 projection to 4.4 percent (previously 4.6 percent)," Teather said. Still, the UBS economist said he sees the Philippines experiencing a slowdown that is more manageable than what its Southeast Asian peers Singapore, Malaysia, and Thailand will have to deal with in the succeeding year. "The shallower slowdown is consistent with the experience of the export led slowdowns of 2001 and 2008, in which Philippines – which has a relatively low export-to-GDP ratio even when remittance exposure is considered – slowed less than the more open Southeast Asian economies on average," he said. —VS, GMANews.TV