‘Prophet of boom’ eyes growth of 6-7% this year

The economy could return to pre-crisis growth levels as early as this year on the back of strong consumer spending and exports, a University of Asia and the Pacific (UA&P) economist said on Monday. UA&P senior economist Bernardo M. Villegas, known as a "prophet of boom" for his optimistic forecasts, claimed the economy could grow by as much as 6-7 percent this year, contrary to most forecasts of an uptick of less than 5 percent. "I would prefer to go against the more conservative projections as I see the economy growing by a hefty 5 percent already in the first semester," Villegas said in a press briefing. Economic growth eased to just 0.9 percent last year due to the global downturn and the government is targeting a 2010 rebound of 2.6-3.6 percent. The World Bank and the Asian Development Bank have forecasts of 3.5 percent and 3.3 percent, respectively, while the state-owned think tank Philippine Institute for Development Studies expects growth of 4 percent. The economy grew by 7.1 percent in 2007, said to be a three-decade high, before slipping to 3.8 percent in 2008 as the global financial crisis took hold. "The world economy is recovering already as reflected by our stronger-than-expected consumer spending and exports growing by double digits, so at the end of the year I see our economy back to what it was in 2007 before the global financial crisis," Villegas said. He said consumer spending would accelerate by 4-5 percent, faster the 3.8 percent growth last year, thanks to election-related spending and infrastructure projects that are set to be completed this year. Exports, meanwhile, were forecast to grow by 11-12 percent, a reversal of last year’s 21.9 percent slump following January’s 42.5 percent uptick. The official target is 7-9 percent. Villegas also said remittances would continue to drive the economy, rising by 8 percent compared to the 5.6 percent growth recorded in 2009. "The common mistake of multilateral agencies when they make macroeconomic forecasts based on remittances is that they tend to generalize overseas workers, neglecting the distinct features of the overseas Filipino workers (OFWs)," he said. "During the financial crisis, the World Bank and International Monetary Fund ... believed that Philippines would fall into recession because of slowdown in demand for OFWs. This did not happen...," he said. The ongoing El Niño weather phenomenon — which has already led to agricultural losses of over P8 billion and power shortages — is not expected by Villegas to have a great impact as rains could come as early as next month. His worst case scenario, he said, would involve a failure of the May elections, which could lead to "zero growth in the second semester translating to 2.5 percent year-on-year growth." Asked to comment, acting Socioeconomic Planning Secretary Augusto B. Santos said: "The 6-7 percent is at the very high side... I think... we will more likely stick with our 2.6-3.6 percent targets... [since]… gains made could be offset by damages of El Niño and the power shortage." University of the Philippines economist Benjamin E. Diokno called Villegas’s 6-7 percent forecast "unreachable" and predicted the economy would grow by just 2.9 percent this year. — BusinessWorld