Despite a better-than-expected growth last year, New York-based think tank Global Source sees the Philippine economy slowing down to 2.5 percent this year due to declining remittances, which have consistently fueled domestic consumption.
In its latest quarterly outlook, Global Source said that seasonally adjusted gross domestic product (GDP) growth was steadily falling since 2008, indicating a weakening pace, while leading economic indicators now pointed to an economic deceleration.
According to Global Source's Romeo Bernardo, consumer spending would continue to weaken this year and the deterioration in external demand would escalate, forcing economies worldwide to contract.
"We are now looking at full-year GDP growth of about 2.5 percent, with abundant downside risks given the alarmingly rapid decline in global outlook," Bernardo said.
Bernardo's observation was broadly in line with previous readings made by the International Monetary Fund, which pegged the country's growth at 2.25 percent in 2009.
"The country will not be immune to the global financial crisis, but it will not be falling into a recession either, from our current viewpoint," Bernardo said, giving credit to financial reforms that he said partly contributed to the country's stable macroeconomics.
But Bernardo cautioned that even the expected slowdown in price increases and the depreciation of the peso would not offset people's tendency to postpone spending.
Bernardo said consumers have been edgy over the dimming prospects for employment both here and abroad and would prefer to hold on to their cash.
Global Source projected the growth in remittances to either be flat or negative, with the possibility of more job cuts overseas.
"The US may well be in its nastiest post-war recession, while countries in the Middle East find themselves battered by a steep drop in world oil prices and sharp losses on sovereign wealth funds," he said.
In the domestic job market, Global Source said the outlook was worse, with the export sector hardest hit by slowing global demand. "We see unemployment easily rising to about 7.9 percent this year," Bernardo said.