The Philippine economy is expected to grow at least 3.7 percent this year, the lower end of the government's forecast, with other sectors and slowing inflation offseting weak exports as the global downturn deepens, a senior government official said on Friday.
The government is targeting gross domestic product growth of 3.7 to 4.7 percent this year, which assumes exports growing 1 to 3 percent.
"The crisis began in September and hit hard in October, November and December," Dennis Arroyo, head of policy planning at the National Economic Development Authority, said in a statement.
"Hence, the fourth quarter of 2008 was already in the crisis era. Yet, the economy still grew by 4.5 percent."
Arroyo said the economy is likely to find support in easing inflation, which should underpin domestic consumption, a key growth driver.
Philippine annual inflation hit a 10-month low of 7.1 percent in January, and the central bank expects the rate to average 3.9 percent this year and 4.7 percent in 2010.
"Given the favourable inflation outlook, the central bank has sufficient latitude to address financial markets stability as well as growth concerns," the central bank said in a statement on Friday.
The central bank slashed interest rates by a total 100 basis points in December and January and analysts are looking forward to more to help the economy deal with the global slowdown that caused Philippine exports to dive a record 40.4 percent in December from a year earlier.
The central bank holds its next rate-setting meeting on March 5.
"We are seeing a deep downturn in global economic conditions with sharp fall in demand, not only deep but broad-based and possibly prolonged," said Cyd Tuano-Amador, managing director at the central bank.
Analysts expect the Philippine economy to post its slowest growth in eight years in 2009 on falling exports and an expected drop in remittances as the global gloom puts pressure on wages and threatens jobs of Filipinos working overseas.
But Arroyo said other sectors like agriculture and services, which will benefit from lower input and fuel costs, could cushion the impact of declining demand abroad.
Still, up to 200,000 Filipinos are likely to lose their jobs this year, said Arroyo.
"Definitely, it will raise the unemployment rate," he said but added it is unlikely to reach 10 percent.
The Philippine jobless rate stood at 6.8 percent in October, according to the latest available government data.