News Update Moody's: OFW money, govt spending to buoy PHL economy

Despite the near-term haze cast by the sovereign debt problem in Europe and the sputtering US economy over the global situation, Philippine output will grow 5 percent next year because of the money sent home by overseas Filipino workers. New York-based Moody’s Investors Service in a report Friday said it also expects government spending to buoy the Philippine economy. "In the coming 12 to 18 months, we expect economic conditions to remain fairly robust, though the pace of growth will moderate due to stronger global headwinds. Our central scenario is for real GDP to grow 4.5 percent in 2011 and 5 percent in 2012, a slowdown from growth of 7.6 percent in 2010," Moody's analyst Simon Chen noted in the report. OFW remittances that account for more than 10 percent of the GDP would continue to be a strong driver of household consumption that make up more than 70 percent of gross domestic product (GDP), Chen said. "While export weakness may persist, GDP growth for the Philippines has been led by services output and household consumption. One unique feature of the economy is the high level of foreign income injections — through overseas worker remittances," the analyst added. The Aquino administration’s public-private partnership program and its P72-billion economic stimulus package announced on Oct. 12 will have a positive impact on the Philippine economy as it navigates through the economic headwinds from the US and Europe. "Another potential uplift for the economy comes from the government’s pump priming. This includes the P72-billion economic stimulus package to finance infrastructure and poverty alleviation projects, as well as the proposed acceleration in approvals of PPP projects," Chen said. National Statistical Coordination Board data showed Philippine output eased to 3.2 percent in the third quarter of 2011 from 7.3 percent a year earlier that bought the nine-month GDP growth to 3.6 percent. Inflation, which moves at manageable levels, will help the Bangko Sentral ng Pilipinas (BSP) to interest rates low next year in support of domestic expansion, according to Moody’s. "Inflationary concerns have receded. Going forward, easing commodity prices from subdued global demand should soften inflationary pressures, barring supply disruptions. Our sovereign team now expects headline inflation to slow to the bottom half of the central bank’s target range in early 2012, which if true, would provide the authorities with more scope to keep interest rates low, and so promote further domestic growth," said Chen. — VS