Wake Up, Philippines!

UBS downscales RP’s growth forecast for 2009

Posted in Economy, Forecasts by Erineus on April 24, 2009

By Des Ferriols Updated November 05, 2008 12:00 AM

Swiss banking giant UBS AG has downscaled its 2009 growth projections for the Philippines from 3.5 percent to 1.8 percent, warning that after the financial contagion has subsided, declining trade would drag Asia into recession.

By 2010, UBS said the Philippine economy would recover slightly and post a 3.4-percent growth.

UBS said in its latest investment research that it has lowered its overall growth projection for Asia (excluding Japan) from 6.1 percent to 4.6 percent—its weakest growth in 30 years except during the 1997 crisis.

“Rates would of course fall in that scenario in Asia but our consistent view is that lost income from exports will weaken consumption and investment across the region,” said UBS economist Duncan Wooldridge.

He said, Asia as a whole would recover by 2010 and grow by six percent which was marginally above the 5.5-6 percent range that was normally marked as “recession-like” in the context of Asia’s growth experience.

UBS kept its growth forecast for the Philippines at 4.6 percent for 2008 but downscaled its projection for 2009 putting the country squarely in the middle.

It projected growth to slow down to 2.5 percent in Indonesia (from the original forecast of 4.7 percent) and flat in Malaysia (down from the original three percent.)

These growth rates, according to UBS, would be accompanied by a dramatic decline in inflation rate from its projected 9.4-percent average this year to three percent in 2009 (due to base-effects) and an average of 3.8 percent in 2010.

UBS said the country’s current account balance would drop to 1.7 percent of gross domestic product compared with the original projection of 1.9 percent of GDP for this year.

By 2009, however, UBS said the current account position would rise to four percent of GDP and settle down at 3.6 percent of GDP by 2010.

UBS said exchange rates were also expected to bring the peso at an average of 50 to the dollar this year, strengthening slightly to 48 to $1 in 2009 on through 2010.

UBS had originally projected the peso to rise to 44 to the dollar in 2009.

Interest rates, on the other hand, are expected to be at an average seven percent this year and ease to 6.5 percent in 2009 and 2010.

It said the deterioration of the global financial conditions and evidence of sharper economic downturns across the world economy prompted it is cut its 2009 global GDP growth projections as well.

UBS said it now experts the US and Western Europe to contract in 2009, accompanied by weaker activity in emerging economies. Global GDP is projected to grow by only 1.3 percent, making it the sharpest downturn in the world economy since the global recession in 1981-1982.

View previous articles from this author.

http://www.philstar.com/Article.aspx?articleid=412662

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