Gov’t sees 6.7-7.7% Q3 growth Range lower than 1st half result but above full-year target THE ECONOMY likely expanded between 6.7% and 7.7% in the third quarter, the government yesterday said, keeping the country on track to achieving above target growth this year. Margarita R. Songco, deputy director general of the National Economic and Development Authority (NEDA), said a strong performance by the industry sector would offset a continued contraction in farm output. "GDP (gross domestic product) growth ... could have been limited by the negative impact of the prolonged El Niño phenomenon on the agriculture sector," Ms. Songco said at a briefing called ahead of Thursday’s official release of third-quarter growth data. "The industry sector is expected to be the main growth driver in the third quarter considering that strong external and domestic demand continued to fuel the manufacturing, construction and mining, and quarrying subsectors." Ms. Songco added the services sector "may have also contributed significantly." Economists polled earlier by BusinessWorld offered forecasts ranging from 6.7% to 7.5% for July to September GDP growth, also pointing to the industry sector as making up for weak farm output and reduced government spending. They also expect full-year growth to exceed the official 5.0-6.0% target, with their forecasts ranging from 6.0% to 7.4%. Analysts polled by Reuters, meanwhile, expect annual growth of 6.8% in the third quarter, at the low end of the government’s 6.7-7.7% outlook. The government is targetting growth of 7.0-8.0% in 2011 and beyond, but signs of an Asia-wide slowdown with stimulus spending fading and slowing manufacturing and exports puts Manila’s bullish forecast at risk. Figures on Monday showed Thailand, Southeast Asia’s second biggest economy, had slipped into a technical recession in the third quarter. Finance Secretary Cesar V. Purisima, speaking yesterday at a briefing at his department, said the government was sticking to the 5.0% growth goal used in setting next year’s budget. "We’ll be happy if we meet 5.0%. We’ll be happier to reach 7.0% to 8.0%," he said. Budget Secretary Florencio B. Abad said in the same briefing that 7.0-8.0% was a "fighting target." "The approach is really to have a conservative plan. We can ... have [a] better [performance], but we are sticking to original plan because the global economy is still volatile and [it would be] prudent on our part as economic managers to be not to aggressive," Mr. Purisima said. He said the government would "take advantage" of opportunities. "We can bid out more PPP (public-private partnership) projects next year [if that happens] and if the market is [seen to be] more receptive for more," he added.
The rising SDA deposit level, however, have prompted increased calls for the Bangko Sentral ng Pilipinas to reduce the interest rate on these deposits. Certain economists said banks would be encouraged to use more of their growing funds for lending to consumers and businesses if the SDA rates would be reduced. They said the liquidity of the banking sector should be used more productively by lending them to the public. Industry data showed that deposits placed by banks in the SDA facility grew by more than 50 percent year-on-year to reach P1 trillion by the end of October, a new high. The interest rate on SDA deposits was set at 4 percent across all tenors. BSP Deputy Governor Diwa Guinigundo said banks were not lending as much as they could not because the SDA rates were high but because there was not much demand for loans. However, he said demand for loan was low because small and medium scale enterprises found it difficult to meet the stringent lending requirements imposed by banks. Guinigundo said banks should relax their lending requirements while maintaining prudent lending standards to attract more borrowers. He said the SDA facility was one of the tools used by the BSP to manage liquidity in the economy and ensure benign inflation. Given the accelerated growth of the economy, the central bank believes that reducing its policy rates could flood the system with cash, which could be inflationary. In the meantime, the BSP said the growing deposits in the SDA served as one of the indicators of the banking sector’s stability. Banks are able to solicit more deposits from the public, which has shown confidence in the banking sector. Some of the funds are used for lending, while some are deposited in the BSP. Bank lending has shown a fairly decent growth so far this year. According to the BSP, loans extended by commercial banks reached P2.17 trillion as of end-September this year, registering a 9.8-percent expansion from P1.98 trillion in the same period last year. Economists said banks should lend much more to help the economy sustain a respectable growth. In the first semester, the economy, measured in terms of gross domestic product, grew by 7.9 percent. It is seen slowing down slightly in the second half of the year and in 2011. Banks may help prevent the deceleration by increasing their lending activities. Redesigned peso bills’ launch set next month -- BSP REDESIGNED peso bills are expected to be unveiled in three weeks and could be in circulation before the year ends, a Bangko Sentral ng Pilipinas (BSP) official yesterday said. "[They are] still being printed. Tentatively set for the 2nd week of December," central bank Deputy Governor Diwa C. Guinigundo said in a text message when asked when the new bills would be launched. An exact date for their issuance has not been set, Mr. Guinigundo said, adding that the launch will be followed by road shows in Manila, La Union, Cebu and Davao. He declined to give details on the new designs. BSP Deputy Governor Armando L. Suratos last September said the new bills would begin circulating in December. He also said the new 500-peso bill would have the image of former President Corazon C. Aquino with her husband, Benigno S. Aquino, Jr. Included in the redesign are new security features for the easier detection of fake money. The changes will be made to the 20-peso, 50-peso, 100-peso, 200-peso, 500-peso and 100-peso notes. The old peso bills, the central bank has said, will remain in circulation three years after the new bills are released. The BSP is also studying new designs for the one-centavo, five-centavo, 10-centavo, 25-centavo, one-peso, five-peso and 10-peso coins. Central banks regularly change the designs of money as a matter of practice to protect currencies from counterfeiters. |
U.S. Stocks Decline for Second Day on Korea Clash, European Debt Crisis U.S. stocks dropped for a second day after fighting broke out among North and South Korea and concern grew that Europe’s debt crisis and China’s efforts to tame inflation will slow the global economic rebound. PulteGroup Inc. and D.R. Horton Inc., the two largest U.S. homebuilders, slumped at least 3.4 percent after a report showed existing home sales trailed estimates. Adobe Systems Inc. slipped 3.4 percent after Morgan Stanley said analysts’ estimates for the first half of fiscal 2011 may be too high. Brocade Communications Systems Inc. tumbled 10 percent as the biggest maker of switches for data-storage networks forecast earnings that missed analysts’ predictions. The Standard & Poor’s 500 Index slid 1.4 percent to 1,180.73 as of 4 p.m. in New York, and earlier fell 1.8 percent, the most since Aug. 11. The Dow Jones Industrial Average lost 142.21 points, or 1.3 percent to 11,036.37. Stocks also declined as the fallout from a federal probe of Wall Street insider trading continued into a second day.
The gain pushed the 10-year note yield to the lowest level in more than a week after North Korea fired artillery shells near the border with the South. Germany’s Chancellor Angela Merkel said the 16-nation euro is in an “exceptionally serious” situation. Yields pared their drops as the $35 billion auction of five-year notes drew the lowest demand since June. “We’ve responded to what’s going on in Ireland and with North and South Korea, so we’re seeing a bit of a reprieve,” said Kevin Flanagan, a Purchase, New York-based chief fixed- income strategist at Morgan Stanley Smith Barney. The yield on the benchmark 10-year note fell three basis points, or 0.03 percentage point, to 2.78 percent at 5:07 p.m. in New York, according to BGCantor Market Data. The price of the 2.625 percent security maturing in November 2020 rose 8/32, or $2.50 per $1,000 face amount, to 98 22/32. |
Crude Oil Falls as Europe Debt Concerns Outweigh Supply Decline Forecast Crude oil dropped for a third day on concern that Europe’s debt crisis will spread and hurt economic growth after German ChancellorAngela Merkel said the euro is in an “exceptionally serious” situation. Oil fell 0.6 percent as the dollar strengthened the most against the euro in three months. The move came a day after Ireland asked for a financial rescue from the European Union and International Monetary Fund. A stronger dollar curbs the appeal of investing in commodities. “The market’s concerned about European contagion with Portugal going next and Spain probably being the coup de grace,” said Stephen Schork, president of consultant Schork Group Inc. in Villanova, Pennsylvania. Crude for January delivery fell 49 cents to settle at $81.25 a barrel on the New York Mercantile Exchange. Prices have risen 4.8 percent in the past year. Brent crude for January settlement dropped 71 cents, or 0.8 percent, to $83.25 a barrel on the London-based ICE Futures Europe exchange. |
Sources: Bloomberg, Reuters, www.inquirer.net, www.philstar.com, www.bworldonline.com, www.cnnmoney.com
Jonathan Ravelas
Chief Market Strategist
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Rhys Cruz
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