Citigroup lowers PHL GDP outlook to 4.8%

US-based Citigroup downgraded its economic outlook for the Philippines to 4.8 percent in terms of the gross domestic product from 5.5 percent this year due to the political tensions in the Middle East and North African (MENA) as well as the disasters that still plague Japan. The lower GDP outlook for the year is still better than the growth achieved during the height of the oil crisis in 2008, said Citigroup economist Jun Trinidad the bank’s Asia Macro and Strategy Outlook. "Downside risks arising from MENA geopolitical and Japan supply disruption risk lead us to downgrade fiscal year 2011 GDP growth prospects to 4.8 percent, from our previous 5.5 percent forecast," Trinidad said. “Our fiscal year 2011 GDP growth forecast, even after the downgrade, remains sanguine compared to growth of 3.7 percent during the fiscal year 2008 oil price episode," the economist explained. The latest economic forecast for the Philippines was a result of the projected P3.6-billion drop in consumption expenditure in which consumption was lowered to 4.7 percent from 5 percent this year, according to the report. "We anticipate voluntary spending curbs likely previewed by slumping first quarter 2011 consumer sentiment. Easing consumption is not just a recurrence of inflation fears and diminished purchasing power similar to what we saw in the first half of 2008," he added. Consumption will grow by 4.3 percent year-on-year in the second quarter of 2011 before improving to 5 percent in the fourth quarter, the US investment bank said. It also lowered its forecast for the remittances of overseas Filipino workers (OFW) 5 percent from a range of 6 percent-6.5 percent. "Uncertainty surrounding Middle East jobs and remittances heightens consumers' fear of reduced household incomes facing more expensive goods and services, according to the Citigroup economist. “Remittance flows should rise by less than 5 percent from the previous assumption of 6 to 6.5 percent, which implies foregone remittances of $209 million to $296 million, which corresponds to 111,000 to 158,000 returning workers," Trinidad said. — VS, GMA News