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Philippines : GDP growth and Inflation
Growth in manufacturing production quickened in the second half of 2012, and exports of semiconductors turned up late in the year. Construction is expected to maintain solid growth. High demand for ho... using and office space is spurring private construction, supported by low interest rates. The government has raised its budget for infrastructure in 2013 and a program to create public–private partnerships for infrastructure development, which started sluggishly, is gathering some momentum. A projected pickup in exports of electronics will contribute to growth in merchandise exports in 2013. Rapidly growing Southeast Asian markets now buy 19% of the Philippines’ exports, up from just 13% in 2008. However, robust domestic demand suggests that imports will be considerably higher, so that net external demand weighs on GDP growth this year. On the balance of these factors, GDP growth is forecast at 6% for this year, with a similar pace anticipated in 2014 (Figure 3.28.9). Growth in remittances and services exports will contribute to current account surpluses of around 3% of GDP. Inflation is seen edging up to a moderate 3.6% this year owing to robust domestic demand and the higher taxes on tobacco and alcohol. These tax hikes added 0.5 percentage points to inflation recorded at 3.2% in the first 3 months of 2013. The firm peso and soft global commodity markets are expected to offset part of the upward pressure on prices generated by strong domestic demand in 2014, containing inflation to a forecast 3.8% (Figure 3.28.10). Inflation at these rates would be well within the central bank’s target range of 3%–5%, giving it the option of keeping policy interest rates accommodative to growth.Sources: Asian Development Outlook database; National Statistical Coordination Board. http://www.nscb.gov.ph (accessed 1 March 2013).National Statistics Office. http://www.census.gov.ph (accessed 15 March 2013).Concerned about risks associated with volatile capital flows, the monetary authorities last year moved to curb speculative inflows by prohibiting deposits from nonresidents in its special deposit account facility and cutting interest rates on these accounts. They also imposed a higher capital requirement for banks’ holdings of non-deliverable forwards, which could be used for speculative purposes and tightened rules governing these instruments. The central bank strengthened its oversight of bank lending for real estate to more closely monitor the impact of capital inflows. Bank balance sheets remain healthy overall: capital adequacy ratios are well above the 10% minimum statutory requirement (16.9% for universal and commercial banks in June 2012), and nonperforming loans are in the low single digits. The government’s credibility as an instrument advancing reform has been enhanced by the higher excise taxes on alcohol and tobacco, which will help to fund health care for the poor, and the passage of the Responsible Parenthood and Reproductive Health Act. Governance reform, too, has made progress, though much remains to be done. The 2012 Transparency International Corruption Perceptions Index ranked the Philippines 105th of 176 countries, still low but above Indonesia and Viet Nam, which had been ahead of the Philippines in 2011.
Rank: 2872 of 4888 in Economy
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