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Global Source: External shocks lack intensity to weigh on PHL economy

March 24, 2011 4:19pm
The repercussions from external events lack the intensity to jar the Philippine economy off tangent toward growth, New York-based think tank Global Source Partners said in its latest monthly report, referring to the unrest gripping the Middle East and North Africa (MENA) and devastation in Japan.

The geopolitical tensions in MENA and the disaster in Japan, the third largest buyer of Philippine exports after Singapore and the US, do not pack enough impact on the Philippine economy to scale down current growth forecasts in place, Global Source said in its March 20 report on the Philippines, titled “Need We Worry?"

"So far, the repercussions of the negative external events do not seem dire enough for us to slash our growth forecasts for the Philippines," the think tank said.

For Global Source, the Philippine economy will grow at a slower pace of 5.4 percent this year in terms of gross domestic product, after growing 7.3 percent — its fastest in 34 years — last year.

"The Philippine economy has already proven to be quite resilient in the face of varied external shocks in the past, especially bolstered by a strong external position and capable monetary management. This time should not be much different," it said.

About 30 percent of the 8.5 million to 11 million overseas Filipino workers worldwide were in MENA states before the unrest started early this year, according to the Bangko Sentral ng Pilipinas. Only 1 percent of the total remittances, however, come from those countries now gripped by unrest.

About 16 percent of the $18.76 billion in OFW remittances last year came from MENA, according to Bangko Sentral records. OFW remittances account for about 10 percent of the country’s GDP.

"We should not see a severe disruption in remittance flows unless fears that political instability will spread to gulf economies materialize and global outlook suffers considerably," Global Source said.

Even if the price of crude oil reach $130 a barrel, the Philippines’ sufficiently large remittance flows will enable its current account surplus to withstand that shock, the think tank explained.

Still, the think tank raises its Philippine inflation forecast to 5.2 percent from 4.3 percent this year.

"Yet despite volatilities in oil markets, we do not foresee a scenario where inflation could rise to double-digit levels. Crude prices are unlikely to remain abnormally high for long, while some peso appreciation might help mute price increases," Global Source added. — VS/JE, GMA News
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