Unescap forecasts 4.8% growth for Philippine economy

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MANILA, Philippines - Exports and the price of oil loom large on the Philippine economy this year, with the euro zone crisis tempering prospects of a return to long-run average growth for the country, according to the United Nations Economic and Social Commission for Asia and the Pacific (Unescap).

At Thursday's launch of the Economic and Social Survey of Asia and the Pacific 2012, Sudip Ranjan Basu, macroeconomic policy and development division economic affairs officer for Unescap, said the Philippine economy is likely to grow by 4.8 percent this year on the back of weak demand for the country's exports.

"For the Philippines, we are forecasting 4.8 percent for 2012, which is considerably lower. If you remember the year 2010 when you had about 7.6 percent growth in that year and that really made a lot of positive impact. But for reasons, especially the export decline last year also caused some uncertainty in economic growth of the Philippines because its very much linked to the major developed countries like the European countries, also the US," said Basu.

Because of its "closeness" to the Euro zone, the Philippines could see a decline of 0.7 to 0.8 percentage points in its gross domestic product (GDP) growth this year and next year. This means that if growth this year and next year will reach 4.8 percent annually, growth will be only reach 4 to 4.1 percent every year," he said.

Unescap forecasts inflation at 3.7 percent, or within the Bangko Sentral ng Pilipinas (BSP) target range of three to five percent.

But if the price of oil rises by another $25 a barrel, this would result in a 1.3 percentage point reduction in GDP growth, Basu said.

Besides cyclical factors, Unescap also raised concerns over structural problems ailing the Philippines, particularly income and social inequality.

Basu said the Philippines alone stands to lose as much as 14 percent of its social development due to rising inequality.

Other threats are disasters, which in 2011 cost the Philippines $465 million or 0.2 percent of GDP.

"We talked about how to balance economic growth. We need to make sure that it is more inclusive and broad-based. In terms of quality of growth, it is more pro-poor. We need to provide quality public service delivery, infrastructure investments. We also need to look into agricultural development by providing much more research and development, providing new investment opportunities," Basu said. 

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