Asian economic turmoil to slow Philippine growth

Asian economic turmoil to slow Philippine growth

MANILA (AFP): The Asian financial crisis will dampen
Philippine economic growth this year and next with the
authorities expected to pursue a tight monetary policy, an
independent think tank said yesterday.

University of Asia and the Pacific (UAP) forecast gross
domestic product (GDP) growth of 5.1 percent this year and 4.6
percent in 1998.

Gross national product (GNP) growth should be 5.7 percent in
1997 and 5.2 percent next year, it added.

It will "definitely (be) a slowdown in the economy," UAP
economist Bernardo Villegas told a news conference, adding that
the regional currency crisis and the "inherent weaknesses" of the
Philippine economy will be major factors.

He described it as a "temporary slowdown" caused by the
scarcity of capital, which he said should force Filipinos to
increase their savings rate.

"In a way, it's been a blessing that our growth rates have
been ranging from four to six percent," which shows that the
economy was not overheated, he said.

Philippine government agencies have agreed to target GNP
growth of between 4.5 to 5.5 percent in 1998.

GNP growth slowed to an annualized 5.7 percent in the three
months to September, compared to 6.9 percent in the same period
last year.

Villegas said the Central Bank of the Philippines was "giving
a great deal of effort to bring down short-term interest rates,"
but that this would not necessarily mean banks would follow suit.

Banks are nervous because of the situation in South Korea,
Japan and Thailand and are sending the message "loud and clear'
by keeping prime lending rates at 25 percent, he said, adding
that he does not expect interest rates to dip below 20 percent in
the next six months.

Villegas said the main beneficiaries of a weaker peso, 33
percent off its July 1 value against the dollar, were the export
sector and Filipinos working abroad.

The depreciation should help reduce the country's current
account deficit, the university said.

But the think tank said in a statement that "a continued high
interest regime and a very tight monetary policy by the (Central
Bank of the Philippines) could easily negate whatever gains we
made from the peso depreciation."