Dutch banking giant raises RP growth forecast

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`2006 IS TURNING POINT FOR RP ECONOMY`
Dutch banking giant raises RP growth forecast
Posted: 2:02 AM | Apr. 17, 2006
Doris C. Dumlao
Inquirer

Published on Page B1 of the April 17, 2006 issue of the Philippine Daily Inquirer

 

THE YEAR 2006 is a turning point for the Philippines, which has freed itself from a fiscal crisis and is now in a good position to lock in gains from resilient economic fundamentals, Dutch banking giant ABN-Amro said.

 

In an upbeat country assessment dated April 7, ABN-Amro upgraded its gross domestic product growth forecast for the Philippines for this year to 5.4 percent from 4.8 percent, citing "pockets of strengths" arising from a likely recovery in farm output and strong inflows from overseas Filipino workers that boost private consumption.

 

But the new forecast for this year is near the lower end of the 5.5-6.2 percent GDP growth targeted by the government.

 

"We believe 2006 marks the turning point for the Philippines; the nation is no longer struggling with a ballooning debt problem so the government can shift the focus back to longer term issues such as infrastructure and social development," the bank's report said.

 

It noted that investor confidence in the country remained high and the attempted coup in February was brushed aside with no more than a knee-jerk selldown in the stock and foreign exchange markets.

 

"We believe this is what investors should continue to focus upon-an economy that has shown resilience and (corporations) that remain innovative in increasing their top lines in a tough macro environment," ABN-Amro said.

 

Aside from the favorable impact of sustained OFW remittances, expectations of a weak La Niña weather pattern should boost agricultural output and thus perk up household income as the farm sector employs 40 percent of the country's labor force, the bank stressed.

 

It projected that ample rainfall would benefit crops such as palay, sugar and coconut, which account for 26.4 percent of the country's farm output.

 

Services, which contribute 48 percent to domestic output, are also seen to remain robust, riding on the continued strong demand for business process outsourcing.

 

An improved take-up of residential property was also noted during the past year, aided by rising household incomes.

 

"Recent capital appreciation has also seen property purchases emerge as a good alternative to savings deposit, as the rate of return has finally surpassed the pace of inflation," it said.

 

ABN-Amro said the growth in the BPO sector had also led to sustained strong demand for office space.

 

"We expect a low interest rate environment this year and hopefully, the lower cost and greater availability of funds will encourage further take-up of consumer credit and mortgage loans, extending the current upswing in private consumption," it said.

 

"The competition in the consumer segment has the potential to begin driving down lending rates especially in the mid-income housing segment where developers are adopting a volume growth strategy to sustain earnings growth," it added.