PHL economy may grow 5.5% in 2011 — Citigroup

After growing at its fastest in 34 years last year, the Philippine economy will continue to benefit from the momentum it gained in 2010, American banking giant Citigroup said in raising its growth forecast for the Southeast Asian nation. In its outlook report, "Can Asia Avoid a Hard Landing," Citigroup economist Jun Trinidad said the Philippines' gross domestic product (GDP) will likely expand 5.5 percent this year, revising its earlier forecast of 5.2 percent. The investment bank's projected growth for the Philippines with its forecasts for Taiwan (4.5 percent) and Thailand (4.2 percent), as well as Indonesia (6.5 percent) and Malaysia (5.7 percent). Citigroup also sees the Philippine economy on a par with that of Singapore's. Compared to last year's performance, the Philippines' lower growth this year could come from possible bidding delays in some projects under the Aquino administration's public-private partnership initiative, Trinidad said. Inflation pressures from global oil and food prices and slower intra-Asian trade could also put a drag on Philippine growth this year, he added. Higher inflation forecast The Citigroup forecast is slower than the 7percent to 8 percent target set by the Cabinet-level Development Budget Coordination Committee. Rising inflation would erode the purchasing power of families receiving remittances from overseas Filipino worker, the Citigroup economist. Citigroup also upgraded its average inflation forecast to 4.2 percent this year, from 4.1 percent, but lowered its inflation numbers 4.9 percent from 5 percent by 2012. For the Bangko Sentral ng Pilipinas, inflation may settle between 3 percent and 5 percent from 2011 to 2014. For this year, its said that inflation will average at 4.4 percent, from 3.5 percent in 2010. Its benign inflation outlook has allowed the Bangko Sentral to keep the overnight borrowing rate at a record low 4 percent and the overnight lending rate at 6 percent since July 2009. This time around, the policy setting Monetary Board will likely increase its policy rates, Citigroup said. "Recent hawkish rhetoric of the Monetary Board in its recent scheduled policy-rate meeting suggests that overnight rate normalization may start as early as in the next meeting on March 24 but no later than the scheduled May 5 meeting," Trinidad said. — JE/VS, GMA News