Lower spending to slow 2011 GDP – Metrobank

The Metrobank Group has revised its 2011 forecast of the Philippine economic growth to 5 percent from 5.7 percent, following a slower gross domestic product (GDP) in the first quarter. In its weekly report, Metrobank research head Marc Bautista said the bank expects a GDP growth of 5 percent to 7 percent on the back of solid personal consumption expenditures, business spending, and continued pump-priming activities on the part of government. “However, it looks increasingly clear that the last part didn’t happen as planned since government spending actually dropped from year-end 2010," Bautista said. The country’s GDP grew by 4.9 percent in the first quarter, the National Statistical Coordination Board reported Monday. GDP ‘moderation’ amid PPP delay Bautista also warned that on top of government underspending, the delayed take-off of major projects under the Aquino administration’s public-private partnership (PPP) scheme would make an impact on the Philippines’ economic growth. “With PPPs expected to kick-in at the fourth quarter and no earlier, we may see continued moderation in GDP growth," he said. Metrobank research analyst Pauline Revillas added, "Moving forward, the Philippines is still expected to continue posting solid growth, albeit slower than the record growth posted last year." “The consumption-driven economy is seen to remain afloat amid the still solid remittance inflows, although consumption might lose steam amid still high consumer prices," Revillas explained. On Monday, militant think-tank IBON Foundation said the government cannot simply rely on PPP projects if it wants to reach its targeted GDP growth of 7.3 percent for 2011. “The target of 7.3 percent for this year," IBON said, “is unlikely to be reached or sustained if all the government is banking on are PPP-driven infrastructure, multi-million cash dole outs, global economic recovery, and the supposed ‘business and consumer’ trust [of] government." Higher interest rates So far this year, the BSP Monetary Board has raised interest rates by 50 basis points to keep inflation expectations well-anchored amid rising prices of oil and other commodities in the global market. The move has brought the overnight borrowing rate to 4.5 percent and the overnight lending rate to 6.5 percent. The BSP said the domestic economy could still absorb the latest policy rates without stoking up inflation. In April, inflation accelerated to a one-year high of 4.5 percent. — Paterno Esmaquel II/VS, GMA News