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Philippines central bank sees no recession ahead
The Philippine economy, after contracting in the first quarter, will not slip into recession this year, Reuters quoted the country’s central bank Governor Amando
Tetangco as saying at the weekend.
Tetangco said the economy was still supported by strong remittances from overseas Filipinos and a sustained deceleration in inflation would boost domestic consumption, a major driver of growth.
Tetangco echoed comments by the head of policy planning at the National Economic and Development Authority who said on Tuesday the economy was certain to post growth in the second quarter on the back of increased state spending but would likely miss the government's full year growth goal of 3.1-4.1 percent.
Economic officials said last month leading indicators for the second quarter, including tourist arrivals and electricity sales, suggested a continued downtrend after the economy shrank a seasonally adjusted 2.3 percent in the first quarter from the previous three months.
An economy is generally considered in recession after posting two consecutive quarters of contraction but Tetangco said that definition was very limited, adding there should be more signs of a widespread deceleration in economic activity.
Remittances are expected to stay flat at $16.4 billion in 2009 from a year earlier, according to central bank estimates.
Officials said last month Filipinos receiving remittances from relatives abroad were saving rather than spending their money due to uncertainty over the depth of the global recession, but Tetangco said the slowdown in inflation should encourage people to spend more.
The annual inflation rate in May fell to a one-and-a-half year low of 3.3 percent and the government has said it expects the rate to hit zero in the third quarter, giving monetary authorities scope to cut rates further to lift economic growth.
"At the moment, our assessment is that the risks to inflation are low, and we have room to ease further, being mindful however that liquidity does not become excessive," Tetangco said.
Last month, the central bank delivered its fifth consecutive rate cut since December, taking the key overnight borrowing rate to 4.25 percent, a 17-year low.
Most analysts think the central bank will cut rates one more time to 4.00 percent at its next policy meeting on July 9 to guard against potential price pressures from increasing oil prices.
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