Rising remittances seen supporting economic growth

By ROSEMARIE FRANCISCO

Rising remittances from workers overseas will support consumption and growth of the Philippine economy this year, but weak net exports and investment spending will limit expansion, a Reuters quarterly poll shows.

A recovery in the agriculture sector after drought last year will also help lift the economy but risks remain from crude oil prices, which hit fresh record highs this month, economists said.

The Philippines imports almost all of its crude oil needs.

The median forecast in the quarterly poll was for the economy to grow 4.9 percent this year, slightly slower than 5.1 percent in 2005. For 2007, the median estimate was for 5 percent growth.

The 2006 growth forecast was slightly higher than 4.7 percent forecast in a similar Reuters poll in January, but was well below a government target of 5.5 percent to 6.2 percent.

"Net exports are unlikely to add much to growth this year with rising oil prices and competition from China seen putting upward pressure on the trade deficit," said George Worthington, chief economist for Asia-Pacific at IFR Thomson Financial.

The government expects exports growth to accelerate to 8 percent this year from just 4 percent in 2005. Analysts said a slowdown in global demand in the second half of the year may weigh on the country’s electronics shipments.

The poll showed that analysts have downgraded their expectations for the Philippines trade deficit this year to a median forecast of .3 billion from .1 billion in the January survey. The 2005 shortfall was .16 billion.

"The key for Philippine GDP growth to break out of the 4.5 to 5.5 percent range is a revival of investment," UBS said in a research note last week.

A government plan to raise infrastructure spending by 50 percent this year, off the back of an improved fiscal position, would help fuel economic activity but private-sector spending continued to be limited by persistent political uncertainty, UBS said. (Reuters)

Although President Gloria Macapagal Arroyo survived the desertion of allies and an impeachment attempt last year, analysts expect allegations of election fraud and graft to continue to hound her.

Remittances from Filipinos working overseas are expected to rise 10 percent to .8 billion this year, which would help the peso sustain gains against the dollar, economists said. (Reuters)

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