EIU sees 1.8% GDP growth for RP in 2009
abs-cbnNEWS.com | 12/04/2008 6:47 PM
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The Philippine economy could skid to a near halt next year, dragged down by weak exports and a ballooning government deficit, a London-based think tank said Thursday.
Economist Intelligence Unit (EIU) expects the country's gross domestic product (GDP) growth to slow to 1.8 percent in 2009, a drastic change from its projection in October when it said the local economy will stay weak at 4.2 percent.
The think tank also projected that exports would contract by one percent and the budget deficit woud rise to 2.1 percent of GDP due to the global crisis.
It said investments would slow significantly as foreign companies remain risk-averse and local firms find it harder to raise capital in domestic and overseas markets.
"Weaker external demand and domestic investment will lead to higher unemployment and will constrain consumption growth," EIU said.
Moreover, the think tank said remittance inflows would likely weaken and fail to support personal spending, which has been the powerhouse behind the country’s growth.
Meanwhile, while EIU sees a decline in commodity prices, it said upward risks to inflation remain.
"The main risk to our inflation forecast is the deeper than expected depreciation of the exchange rate, which would push up the price of imported goods and services," EIU said.
It expects inflation to ease to 6 percent next year, an improvement to its November forecast of 7 percent.
EIU also said President Gloria Arroyo was expected to make little progress on reforms during the remainder of her term of office, particularly on the government’s main policy target of balancing the budget.
"Considerable progress towards this goal has been made," EIU said. "However, the government has now all but conceded that it will not be able to achieve its aim of balancing the budget by 2010, owing to its plans toi stimulate the slowing economy with additional expenditures."
According to EIU, the budget deficit would preclude the possibility of aggressive fiscal stimulus because the government would find it difficult to finance a larger external borrowing requirement under present market conditions.
