New York think tank mulls lowering forecast on PHL 2011 output

New York-based think tank GlobalSource Partners said Thursday it may lower its gross domestic product growth forecast for the Philippines depending on how global economy will perform. "However, we are also poised to downscale our expectations depending on how gloomier the global outlook gets, especially with talk now rife of a double-dip US scenario," the research and analysis firm said in its latest market brief entitled, “Philippines: Suddenly, Slowdown." The firm added that the possible downgrade is also due to the lower-than-expected Philippine output in the second quarter of 2011. GlobalSource said it still expects GDP to expand by 4.8 percent this year and 5.5 percent in 2012. "With the second-quarter slowdown mainly a result of government spending compression and hence reversible, we tentatively hold on to our 4.8 percent forecast for the year and 5.5 percent for 2012," it said. On Wednesday, the National Statistical Coordination Board (NSCB) reported that GDP in the second quarter grew to 3.4 percent, or 1.5 percentage points lower quarter-on-quarter and much lower than the 7.9 percent growth recorded in the same 2010 period. The dip, according to NSCB, was due to the higher oil prices, sustained weakness of the global economy, political unrest in the Middle East and North Africa and the aftermath of natural disasters in Japan. The second quarter results also brought down to 4 percent the GDP growth for the first half of 2011, compared to the 8.7 percent in the same 2010 period. Under spending, adjusted forecast The Cabinet-level Development Budget Coordination Committee (DBCC) pegged GDP growth for 2011 between 7 percent and 8 percent, compared to 7.6 percent last year. However, recent developments have now put GDP expansion at five percent to six percent this year. BSP officer-in-charge Diwa Guinigundo said on Wednesday government needs to spend more in order to stimulate domestic output. “Public spending also needs to further expand so that infrastructure and social safety nets can be funded," Guinigundo stressed. GlobalSource concurred with Guinigundo, saying that the GDP slowdown in the second quarter was due to the decline in construction because spending in public works plunged by 51.2 percent despite the 19 percent increase in private activity. “This also bears out our forecast of a slow start for the public-private partnership program, likely impeded by governance problems carried over from the previous administration and the desire of the current government for high quality at entry contracts or projects," the think tank said. In 2009, the Philippines was on the verge of a recession when its GDP grew 1.1 percent from 3.8 percent in 2008 because of the global financial crisis. President Aquino’s economic planners on Wednesday pledged to boost government spending in the next few months to stimulate the economy and make-up for the slack in the first two quarters. — BC/VS, GMA News