After the surprising Philippine economic growth in the first half, the American banking giant Citigroup said Thursday that the southeast Asian country’s gross domestic product would slow down to 5.6 percent this second half of the year.
In a report – Emerging Markets Daily Asia Edition – Citigroup economist Jun Trinidad said the Philippines would "assume a moderate downtrend in expenditures and production, such that second half 2010 growth may settle at 5.6 percent year-on-year."
The Philippine economy grew 7.9 percent in the second quarter and 7.3 in the first quarter, as measured by the GDP in the last six months of former President Gloria Macapagal-Arroyo's administration.
Trinidad said the 203-percent rise in investment project approvals in the first half would continue to support real investments growth of 9 percent from July to December and 7.6 percent by 2011.
Under the medium-term plan, government has lined up P400.9 billion worth of infrastructure projects in the transportation and water sectors from 2009 to 2013.
Average investment activities of P80 billion a year translates to roughly 5 percent of GDP next year, increasing the overall 2011 GDP growth from 9 percent to 10 percent, Citigroup said.
"So infrastructure development under the public-private partnership could provide the upside risk in our forecasts in case the Aquino administration's pursuit of governance ideals lead to an investment setting that can entice more private capital participation and support the shift to investment-driven growth over the medium-term," he said.
The bank also expects that the Bangko Sentral ng Pilipinas (BSP) will tweak its key policy rates this year.
"We think the impact of an elevated first-half growth over the forecast horizon would increase potential for inflation surprises, although the Monetary Board remains confident that inflation's future path would fall within the target ranges of 4.5 plus or minus 1 percent in 2010 and 4 percent plus or minus 1 percent in 2011 and 2012," Trinidad said.
"The Monetary Board decision does not change our view that the board may hike overnight rates later in the year," he said.
Benign inflation rates in the first seven months gave monetary authorities the flexibility to keep the overnight borrowing rate at a record low 4 percent, the overnight lending rate at 6 percent. —JE/VS
