Country Report Philippines December 2008

Outlook for 2009-10

• The president, Gloria Macapagal Arroyo, will remain in office until her term ends in 2010. She has the support of the armys senior generals and controls more than two-thirds of the House of Representatives (the lower house).
• The president will continue with constitutional reforms to replace the presidential system of government with a parliamentary one. The opposition will see the reforms as an attempt by the president to remain in power.
• Economic growth will slow sharply in 2009, when real GDP will expand by 1.8%, less than half the 2008 level of growth, which is estimated at 4.2%. Exports of goods and services will contract by 1% at constant prices.
• As a result of slower economic growth, lower than expected revenue and higher expenditure, the governments budget deficit will widen to 2.1% of GDP in 2009 from an estimated 0.9% of GDP in 2008.
• Inflation will fall to 6% in 2009 from an estimated 9.6% in 2008 as a result of weaker demand-side pressures, as well as falling world commodity prices, which will ease pressures on the supply side.
• The current account will remain in surplus in 2009-10. Merchandise imports will fall faster than exports as a result of a decline in global crude oil prices.

Monthly review

• Opposition figures, led by a prominent businessman, Jose de Venecia III, have filed a fourth impeachment complaint against the president in as many years.
• The government has revised down its economic growth forecasts. According to the budget secretary, Rolando Andaya, real GDP is expected to expand by 3.7-4.7% in 2009, compared with previous forecasts of 6.1-7.1%.
• The Bangko Sentral ng Pilipinas (BSP, the central bank) has reduced the banking sectors reserve requirement by 2 percentage points to 19% in a bid to ease credit conditions.
• Headline inflation fell for the second successive month in October, owing to lower rises in food prices. The consumer price index rose by 11.2% year on year, compared with a rise of 11.8% year on year in September.
• The budget deficit widened to P21.6bn (US$460m) in September, taking the shortfall during the first nine months of the year to P53.4bn, well above the original target of P35.1bn.
• The government has revised up its external borrowing requirement for 2009. According to the finance secretary, Margarito Teves, the government will seek to raise P123.4bn, up from P115.6bn previously.

Source: Country Report

This report covers the following industry codes:
SIC Code: 60
NAICS Code: 52