MANILA, Philippines - The Philippine economy is forecast to grow by just 3.6 percent this year, from an earlier outlook of 4.2 percent, the eurozone continued to slip into a recession and the US economy remained stagnant, the Hongkong and Shanghai Banking Corp. (HSBC) said in a report.
“The Philippine faces more limited spill-over risks and has some room to adjust policy, although the balance sheet ranking is not the best,” the British banking giant said in its Asean-5 report released yesterday.
It said since the Philippines is export-oriented, it is vulnerable to losing steam due to lower consumption in the developed nations.
“Weaker exports of electronics have slowed momentum in the manufacturing sector,” HSBC said.
The Asean-5 – Indonesia, Malaysia, the Philippines, Thailand and Vietnam – have not escaped the global economic jitters. Apart from portfolio outflows, rising market volatility and widening risk premiums, exports are cooling off, HSBC said.
While HSBC recognized the accommodative monetary policy and domestic growth support on the five economies, it said sovereign debt crisis in Europe poses too much downside risks.
The Asean-5’s currency and financial markets were also not spared. Equity and bond markets have also suffered as risk-off environment has persisted and seen investors increasingly sit on their hands, it added.
Bond and equity funds in the sub-region saw a huge outflow but there are noticeable inflows in modest scale.
“Nevertheless, with the problems of Europe unresolved and the global economic outlook clouded by uncertainty, markets risks could quickly flare up again if the crisis escalates,” HSBC said.
Meanwhile, inflation pressures remain firm, although annual headline inflation has eased a bit in recent months, which partly reflects a decline in food and commodity price inflation.
“But we have also seen easing in sequential inflation (seasonally adjusted) although it is still running high. The Philippines has seen the momentum pick up in recent months,” HSBC added. - By Ted P. Torres