MANILA, Philippines - Singapore-based DBS sees the country’s imports growing at a slower pace of six percent this year from 26.9 percent last year due to weak global trade brought about by economic uncertainties in advanced countries led by the US.
DBS said imports would likely contract by 1.4 percent year-on-year for the month of August.
“Currently, a 1.4-percent year-on-year contraction has been penciled in for August. For the full year, import growth is expected to be around six percent,” the investment bank said.
Imports grew by 14.3 percent to $35.5 billion in the first seven months of the year from $31.06 billion in the same period last year. For the month of July alone, imports climbed by 6.6 percent to $4.99 billion from $4.68 billion in the same month last year.
“The external sector is not going to be able to provide a lift to the Philippine economy in the short term,” DBS said.
It said import growth would likely fall into negative territory for the rest of the year with base effects weighing.
Last year, total imports posted a 26.9-percent increase to $54.702 billion from $43.092 billion in 2008.
It pointed out that export growth dipped to a 23-month low of -15.1 percent year-on-year in August and is expected further to contract in September.
“There is limited impetus for import growth in the near term. Weak global demand for electronics has translated into negative export growth since May,” it added.
The Cabinet-level Development Budget Coordination Committee (DBCC) recently slashed the country’s gross domestic product (GDP) growth target to a range of 4.5 percent to 5.5 percent instead of the revised five percent to six percent due to slower than expected economic growth in the first half of the year.
The country’s GDP expanded by four percent in the first half of the year from 8.7 percent in the same period last year due to weak global trade and underspending by the Aquino government.
This gave the Bangko Sentral ng Pilipinas (BSP) enough room to keep interest rates steady to boost economic activity.
“Therefore, it was not surprising that the central bank left the benchmark policy rate unchanged at 4.5 percent at the recent monetary policy meeting on October 20,” DBS said.
The BSP has kept interest rates steady for four straight policy rate setting meetings since May 5. The Monetary Board slashed interest rates by 25 basis points last March 24 and by another 25 basis points last May 5 as a preemptive move to keep inflation expectations well anchored.
It also raise the reserve requirement ratio for banks by 200 basis points last June 16 and July 28 to siphon off P70 billion worth of liquidity from the financial system to curb additional inflationary pressures.
However, the BSP last week lowered its inflation forecast to three percent instead of 3.4 percent for 2012 but kept its forecast of 4.46 percent for this year.
“This signals a readiness to ease monetary policy further in the coming months if needed,” DBS said. - By Lawrence Agcaoili
