ADB: RP Sure to Grow 5.4% in 2006

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In its latest assessment, the Asian Development Bank (ADB) has maintained its 5.4 percent gross domestic product (GDP) growth forecast for the Philippines this year, at par with its mid-year estimate but higher than the original 5.0 percent projection for 2006.

In its latest Asia Economic Monitoring report, ADB said the the country's GDP growth will be both export and consumption-driven, supported mainly by "robust" dollar remittances from overseas Filipino workers (OFWs).

ADB believed the "sustained" inflow of dollar remittances by OFWs, which hit $9.11 billion from year to end September this year, will "led to a likely 5.4 percent economic expansion in 2006."

Even, bankers have admitted that the healthy OFW remittances spawned the creation of new financial products specifically designed for this cash-rich segment, particularly housing, which has huge trickle down effect on the other sectors of the economy.

The change in the demography of OFWs to highly-paid medical practitioners in recent past from domestics at the onset contributed to this healthy remittance growth.

Moving forward, however, ADB anticipated a slight slowdown in GDP growth, at 5.3 percent for the coming year from its mid-year revised assessment of 5.4 percent but better compared to its original view of 5.0 percent for 2007.

At the same time, the ADB said the Bangko Sentral ng Pilipinas (BSP) can take an accommodative "loosening" of its monetary policy position with inflation rate in a downward momentum.

In its latest Asia Economic Monitoring Report released before the week ended, ADB said the slide in inflation rate, which stood 4.7 percent in October, the lowest in recent months, can set off a relaxation in BSP monetary policy.

"Some scope for loosening the monetary stance exists, especially, if inflation continues to decline," the ADB report said.

This view of ADB, however, has no timeframe which it believed the BSP will cut its key overnight policy interest rates.

On Thursday, the Monetary Board, the policymaking body of the BSP, will meet for its last policysetting for the year.

Market players have expressed mixed views on the possible BSP action with some saying that the present monetary policy, both on its key overnight interest rate policy and the tiering-system designed to spark lending activities may likely to be maintained as additional data to support any adjustments will still have to be collated. …