Philippine exports will likely drop 8 percent this year with the country's key markets deep in recession, but easing inflation may still help the economy reach the low end of the official growth target, a government source said on Tuesday.
The forecasts are part of an ongoing review of the country's macroeconomic and fiscal assumptions this year and will be presented to the inter-agency Development Budget Coordination Committee this week for approval, the source told Reuters.
The updated export forecast is a reversal of the government's original estimate of a 1-3 percent exports growth this year, the source said. Exports last year fell 2.86 percent from 2007.
Philippine exports plunged 40.4 percent in December from a year earlier, the steepest fall in over two decades and in step with dire exports data in other countries in the region, due to weak global demand.
With export demand seen drying up, the government was considering lowering the high end of its current 3.7-4.7 percent growth forecast for 2009, resulting in a narrower forecast range, the source said.
Dennis Arroyo, head of policy planning at the government's economic planning office, said on Friday slowing inflation may help consumption, a key growth driver, allowing Manila to hit the low end of its growth forecast.
The central bank has said inflation could slow to 3.9 percent this year before picking up pace to 4.7 percent next year. Inflation in 2008 averaged 9.3 percent, the highest in 10 years.
The latest estimate for average annual inflation for 2009 was 3-5 percent, below the current official forecast of 6-8 percent, the source said.
The government may also revise upwards its 2009 budget deficit ceiling to around P160 billion ($3.3 billion) or 2 percent of gross domestic product, from an earlier estimate of a P102 billion shortfall, according to the source.
The 2009 fiscal deficit could widen further if an additional budget of over P11 billion for the automation of the 2010 presidential elections is approved by Congress, the source said.