MANILA, Philippines - The Hongkong and Shanghai Banking Corp. (HSBC) forecasts the Philippine economy to grow by 4.8 percent in 2012 and by 4.6 percent in 2013.
The British bank had retained its 2011 growth forecast of 4.3 percent for the Philippines, after a strong 7.6 percent in 2010.
However, the foreign financial institution made it clear that the 2012 outlook is hinged on strong government spending, specifically on infrastructure.
“That is assuming that government will be spending heavily on infrastructure, and that the delayed projects under the Public-Private Partnership (PPP) program will be implemented,” Frederic Neumann, HSBC managing director and co-head of Asian Economic Research, said in a press briefing yesterday.
Neumann was referring to the weak government spending, particularly in infrastructure, this year. He was also referring to the 2011 targets for the PPP program, which never got off the ground.
“There should be more spending on the right areas rather than just concentrating on reducing the country’s budget deficit,” he said. “Once the spending takes place, actual growth can be realized.”
But the main external impediment to growth for 2012 is the European debt crisis, and the threat of a double-dip recession, which, in turn, results in weak buying of Philippine exports.
Neumann lamented that exports are losing their competitive edge, made more difficult by the weak demand for electronics, the main Philippine export.
But the strength of the Asian market offset what could be weaker growth. What could weigh down on the Asian market, including the Philippines, is when China’s economy suddenly decelerates.
Neumann said despite the expected slowdown of the Chinese economy in 2013, the Philippines could rely on increased domestic spending, intensified private consumption, gains from the business process outsourcing, and remittances from overseas Filipinos. - By Ted P. Torres
