Tetangco: Fundamentals to push economy forward

May 4, 2009 1:35 am 

MANILA, Nay 3 — Economics experts have been saying that the Philippines will sustain a huge growth reduction of a magnitude reflecting the current global economic downturn.

First was the International Monetary Fund whose resident representative forecast zero-growth this year from 2.5 percent just two months earlier.

Then the Asian Development Bank scaled back its growth forecast followed more recently by readings from Standard and Poor’s, which concluded that local output this year would continue to suffer no matter with the ongoing attempts by government to optimize growth via fiscal and monetary easing measures.

But to Bangko Sentral ng Pilipinas Governor Amado Tetangco, Jr., the economy would still continue to push forward at a significant pace, albeit at a rate slower than previously seen.

"As I had said in the past, there are fundamental forces that would help the country avoid a major growth slippage.

“The strength of domestic consumption from our young and economically active population (is one),” Tetangco said in citing one such strength.

Some 45 million Filipinos aged between 15 to 64 years, the bulk of their number being young, are the main drivers of the country’s consumption activities which account for more or less 75 percent of the gross domestic product.

He also cited the country’s reduced dependence on exports, which now accounts for only 29 percent of GDP from almost 50 percent in 2000.

He also cited the small number of displaced workers compared to the overall stock of overseas Filipino workers or OFWs, the majority of whom are higher skilled and with longer contracts.

There was also the cost competitive business process outsourcing, or BPO industry, which remained attractive to firms that wished to streamline costs, Tetangco said.

BPOs helped strengthen the country’s external sector whose foreign exchange earnings also kept the country’s balance of payments forecast to remain in surplus this year, he added.

"From the BSP side, we had earlier moved to ensure that there is sufficient liquidity in the system. This, to purposely avoid the credit crunch that the majors are now experiencing,” Tetangco said.

"With the risks to inflation subdued, we have continued to calibrate monetary policy to support demand and ensure that growth prospects are kept steady," he said.

Inflation, whose corrosive impact on earnings is the one thing that pushes the central bank to make constant monetary policy adjustments, has moderated substantially to just 6.4 percent in March after having trended up to 7.3 percent in February.

Inflation in January averaged only 7.1 percent. (PNA)

<br>RMA/Jun Vallecera/rsm

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