ING Bank: 7% growth possible

ING Bank Manila said a 7-percent GDP growth this year is possible, especially if the government can implement its economic reforms.

ING Bank Manila senior economist Joey Cuyegkeng, in a forum held at Shangri-la Hotel in Makati City, said the Philippines remained in a “sweet spot” of relatively fast growth and low to moderate inflation

He also maintained his growth forecast this year for the Philippine gross domestic product at 6.5 percent to be driven by higher fiscal spending, robust domestic demand and investments.

Cuyegkeng said the more broad-based economic activity, household consumption, investment, higher fiscal spending (targeted at around 3 percent of GDP), and the so-called “Golden Age of Infrastructure” would push the economy to sustained high growth trajectory.

“The first four months of the year is a little bit disappointing due to lower spending,” Cuyegkeng said. “ But a 7-percent growth remains a possibility, depending on whether the government could implement its programs… ,” Cuyegkeng said.

“As long as reforms could be implemented, the 6.5 percent economic growth could be easy,” he said.

The economy expanded 6.4 percent in the first quarter, slower than 6.9 percent a year ago and 6.6 percent a quarter ago, weighed down by sluggish spending that was robust in the same period last year in the run-up to the presidential elections.

But Cuyegkeng cited the government’s peace initiatives with the Moro Islamic Liberation Front, Moro National Liberation Front and the Communist Party of the Philippines, along with the eradication of illegal drugs in the country as positives for the economy.

Other initiatives that could contribute to economic growth would be the government’s push to cut poverty incidence, enhancing competition and removing rent-seeking, and agricultural development.

Cuyegkeng, however, said the “lawlessness” associated with the extra-judicial killings of those suspected of using or peddling drugs could be negative for the economy.

He described as “rocky” the recent new set of local political developments and concerns that might affect economic growth going forward. These are the return of Marcos and Arroyo to mainstream politics, the electoral protest against Vice President Leni Robredo, the prevalence of corruption, mining closures and threats of terrorism.

He said remittances from overseas Filipino workers and revenues from business process outsourcing would remain supportive of the economy, although he cited the risks threatening the BPO sector that could emanate from the proposed comprehensive tax reform program of the government.

The Information Technology and Business Process Association of the Philippines earlier said the removal of fiscal incentives would hit call centers. The group said maintaining the current benefits that BPO’s had been accustomed to for the last 15 years was key to maintaining the competitiveness of the industry.

Remittances and BPO receipts together account for around $50 billion inflows annually, which provides strength to the country’s external position.