RP exports to suffer from global electronics slide

Investment bank UBS AG warned that the lack of diversification in the Philippines' export products of the Philippines makes it among the most vulnerable in the downturn of the global demand for electronics this year. In its latest investment research focusing on Southeast Asia, UBS projected the country's export growth to slowdown to 5 percent this year, from 14 percent in 2006, due to a decline in the world's demand for electronics. Electronics and other related products make up roughly half of the Philippines' export bill. However, UBS said domestic demand will likely take up the slack from the exports slowdown, minimizing the effect this will have on the country's economic growth for the year. "In the Philippines this degree of diversification is much less where the electronics/ semiconductor category accounts for 56 percent of total exports. As a result we expect Philippines manufactured exports to be relatively hard hit," UBS said. "The soft landing scenario for exports creates a role for compensating domestic demand. We see this across much of ASEAN... in economies where real GDP growth is least sensitive to exports (Indonesia and the Philippines) there are solid reasons to expect a cyclical recovery in domestic demand," it added. UBS AG noted that only 10 percent of the Philippine exports come from services and 5 percent in commodities, which could also serve to cushion the impact of a slowdown in electronics. "As a result the soft landing should enable real GDP to see a modest acceleration in '07 following the structurally lower local cost of capital, the reemergence of private credit as an engine of growth, high remittances and very positive outlook in property, construction and infrastructure areas," UBS said. Government has projected the Philippine economy to grow anywhere between 6.1 percent to 6.7 percent this year.-GMANews.TV