UBS adjusts PHL economic forecast to 4.5% from 3.3%

The Philippine economy could grow 4.5 percent in gross domestic product terms this year, Union Bank of Switzerland said Friday, adjusting its forecast from 3.3 percent on improved investor confidence.   Its revised forecast reflects its perception that the Bangko Sentral ng Pilipinas has concluded its policy rate adjustment, according to UBS.   The Bangko Sentral’s Monetary Board took a widely expected break in its monetary policy adjustment last week, following two interest rate cuts earlier this year that brought the key rates back to a previous low of 4 percent for overnight borrowing and 6 percent for overnight lending. The Monetary Board took note of the balance of risks to inflation outlook, saying it leans on the upside because of higher oil prices spurred by tensions in the Middle East and strong demand from emerging economies.         In terms of investments, the prospects seem rosy for the Philippines as reflected by the strong performance of Philippine equities market which out performed its peers in the region, UBS noted.   “Relative to ASEAN, the recent outperformance of the Philippine equity market seems linked to prospects for an upswing in investment. We can see the potential for a further leg up in investment activity as GDP growth recovers from a slower than average pace in 2011–based on easy credit conditions and available savings,” according to the Swiss commercial bank.   It noted fiscal spending has started picking up this year. “The national government spending growth as we hoped and the BSP has eased monetary policy while other lead indicators suggest a trough in the cycle was reached earlier than we anticipated.”   “We choose to reflect the apparent burst of growth in early 2012, with the possibility of consolidation in the second quarter of the year, ahead of a return to more steady growth,” UBS said.   “To be sure, national accounts data barely reflected the weakness in high frequency exports and manufacturing data in 2011 and so we do not reflect the full extent of the rebound in our forecasts,” it added.   For 2012, UBS noted the likelihood of the Philippine economy growing by 4.7 percent.   The Aquino administration expects the economy to grow between 5 and 6 percent this year and 6 to 7 percent next year.   Philippine output last year grew by 3.7 percent, from 7.6 percent in 2010, on low government spending and weak global demand. In 2010, the economy was boosted by election spending. —VS, GMA News