Election spending, strong exports to lift PHL economy in 2013–US think tank

New York-based Global Source Partners said Tuesday that election spending and strong global demand could grow the Philippine gross domestic product (GDP) by 5.5 percent next year, revising its earlier forecast of 5 percent.

 

The 2013 national elections would definitely boost the economy, former Finance Undersecretary Romeo Bernardo and economist Margarita Gonzales said in the think tank’s Philippine quarterly report, entitled “So Far, So Good.”

 

Bernardo and Gonzales noted, “The outlook for next year should be better at about 5.5 percent growth, given that it is an election year and with possibly stronger export growth in view of moderate improvement in the world economy.”

 

For this year, however, Global Source is firm on its 4.5 percent GDP growth forecast, citing delays in major infrastructure projects under the public private partnership program.

 

It also cited the economic uncertainties in the US and the financial crisis now plaguing Europe.

 

“Given the external uncertainties and the possible impact on exports and remittances, we temporarily keep our forecast at 4.5 percent this year, though taking note of strong business sector optimism and what looks to be robust domestic spending, even without the PPP,” Bernardo and Gonzales said.

 

According to World Economic Outlook (WEO) of the International Monetary Fund (IMF), the global GDP is expected grow by 3.7 percent this year and 4.1 percent next year.

 

“Up until recently, it seemed like things were finally getting better for the world economy. But recent developments have shown how fragile the global economy really is, with troubles returning to the euro zone,” Global Source stated in its May 21 report released Tuesday.

“So far, the central scenario remains to be a moderately positive one about

4.5 percent growth this year and 5.5 percent the next, in our estimate–with bright private consumption and public spending as well as dark spots downside risks to the global economy and fragile export recovery,” Bernardo and Gonzales said.

 

Inflation is expected to ease to 3.6 percent this year before picking up to 4.5 percent next year or well within the target of 3 percent to 5 percent set by the Bangko Sentral ng Pilipinas (BSP).

 

Inflation averaged 3 percent in the first four months of the year.

 

“While this surprise uptick likely meant inflation bottomed about a couple of months earlier than we had expected, we find no compelling reason yet to change our full-year average forecast of 3.6 percent this year and 4.5 percent the next,” Global Source said.

 

“For the moment, monetary authorities will likely refrain from making additional policy rate cuts, especially if growth matches business sector optimism and liquidity concerns resurface,” Global Source said.

 

The BSP’s Monetary Board kept interest rates unchanged last April 19. The next policy meeting of the BSP is June 14. —VS, GMA News