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MANILA - (UPDATED 1:48 p.m.) Standard and Poor's Ratings Services (S&P) sees the Philippine economy slowing down this year through 2015.
In its latest research note, S&P said its base case scenarios for the Philippines are growth rates of 5.9 percent this year, 5.7 percent in 2014 and 5.4 percent in 2015.
The Philippines' gross domestic product (GDP) expanded by 6.6 percent last year, breaching the government target range of 5-6 percent.
"Our base case scenario for Asia Pacific is for 2013 growth to either hold steady or be slightly stronger than last year...The easing of risks in the Eurozone and expectations of quickening growth in the US are positive factors for the region's outlook," S&P said.
In addition, inflation pressures in the region have eased and are "not a concern" for most countries except for India and China. With that scenario, monetary policy of central banks in the region may ease or on pause.
But then the monetary policies of advanced economies are encouraging "very strong" capital flows into Asia Pacific and these funds can quickly exit the region if conditions improve in Europe and the US.
"The volatility and management of these flows is, in our opinion, a risk for many economies in the region, increasing the potential for significant currency revaluations, shifts in relative import and export flows and relative competitiveness, commodity price movements, and raising the potential for asset and credit bubbles to form," S&P said.
As for the world economy, the ratings firm said it is less pessimistic about global credit conditions than a few months ago as prospects have improved "mildly" and risks have eased.
It cited the actions of the European Central Bank and that of the US Federal Reserve, the agreement on the first half of the fiscal cliff in the US, and Chinese measures to avoid a hard-landing, all of which have contributed to mitigating risks.
There are signs that the US economy is picking up, as the risk of a policy shock has "somewhat" eased and the housing market is recovering. Europe's ongoing recession may also cease by the end of this year.
"We also believe growth in most of Asia Pacific and Latin America will generally hold steady or pick up this year, after slowing sharply in 2012. And although we are skeptical about its ultimate outcome,
Japan's reflation efforts are also potentially positive for regional and global economic growth," S&P said.
However, risks have not dissipated as the US would still have to hurdle the fiscal decisions its government has to make. Europe also has to address its sovereign and banking sector crises.
S&P also does not see Europe returning to healthier, more normal growth rates before 2015.
On top of this, China may also undergo an investment correction that could lead to an economic downturn. Also, the risk that economic growth in Brazil would be disappointing and weigh on the rest of South America remains.
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