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February 23, 2008

Sentiment low but growth seen high

While Philippines central bank’s found low business sentiment in the wake of political turbulence and US slowdown, global rating agency Standard & Poor is forecasting an economic growth as high as 7% in 2008.
The latest central bank industry survey showed growing political unrest and an economic slowdown in the United States hurting business confidence in the Philippines.

Companies in the survey cited "local political noise" and concerns over a possible US recession, reduced export competitiveness due to the strong peso, and a relentless surge in oil prices, as key reasons leading to "cautious outlook," said the Bangko Sentral ng Pilipinas Business Expectations Survey.

The first quarter survey was made as President Gloria Arroyo tries to fight off fresh corruption allegations following a robust 2007 that saw economic growth reach a 31-year high 7.3 percent, a 20-year low inflation rate of 2.8 percent and the lowest budget deficit in 10 years.

The central bank said 26 percent of respondents were in the export sector, an area that accounts for about 45 percent of the Philippine economy.

The survey found that the general outlook for all sectors remained positive, particularly for the construction and services sectors. Average capacity use for all sectors rose 6.8 index points to 83.1 percent compared to late 2007, and they expected to hire more workers in the three months to June period.

Respondents expect the peso to remain strong for the rest of the first half, while anticipating higher inflation but lower interest rates. The central bank said it polled 1,258 companies between January 7 and February 6.

There have also been concerns over the Philippines’ poor revenue performance, but Standard & Poor’s Ratings Services said the country can withstand a possible US recession.

The Philippine economy, as measured by the country’s gross domestic product (GDP), would grow 6 percent to 7 percent this year, Agost Benard, S&P’s associate director, said.

“We see GDP pretty much close to government target. We’re not too worried about the effects of US recession,” Benard told reporters. He also said overseas Filipino remittances will not decline significantly this year on the back of the US’ economic woes.

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