By Karen Lema and Rosemarie Francisco
MANILA, Oct 14 (Reuters) - The Philippines, grappling with the economic impact of two devastating typhoons, will keep interest rates low despite a possible uptick in prices, the central bank governor said on Wednesday.
Remittances from Filipinos working overseas, a driver of consumer spending which fuels more than two-thirds of gross domestic product, were likely to grow 4 percent this year from 2008's record $16.4 billion and support growth, Amando Tetangco told reporters at a briefing.
Previous forecasts were for 2009 remittance to grow 3 percent.
'There's enough headroom in case there will be an uptick in the inflation rate,' he said. 'The favourable inflation outlook gives us room to maintain the stance of monetary policy for now.'
The key overnight borrowing rate is at a record low of 4.0 percent. The central bank has cut the rate by 2 percentage points since December last year, but has held it steady since August.
Meanwhile, the government said it will maintain its targeted 2009 budget deficit at 250 billion pesos ($5.4 billion), although this could slip to 300 billion pesos if revenues continued to fall and privatisation of state assets failed.
Finance Secretary Margarito Teves said no decision had yet been taken on how to fund the extra 12 billion pesos expenditure authorised by Congress for typhoon relief, but said if a global bond was issued, it would be for $500 million.
'It looks like right now it might really be a menu (of options),' he said at the same briefing.
He said later that any funds raised could also be used for 2010 requirements.
Agriculture Secretary Arthur Yap said farm sector growth should slip to 0.5-1.5 percent this year from a previously targeted 3-3.5 percent because of the typhoons. The sector accounts for about a fifth of GDP, but other officials said the GDP growth target remained at 0.8-1.8 percent this year.
EXPORTS SLUMP, RECOVERY
Tetangco, the central bank governor, said the fall in the country's exports this year was likely to be more pronounced than previously estimated, but a return to growth was seen in 2010 as the global economy recovered.
He told reporters exports should fall 20 percent this year but grow 7 percent in 2010. Imports, which are dominated by components for electronics goods for export, would fall 17 percent this year and grow 13 percent next year, he said.
Previous forecasts have been for exports to fall 13-15 percent in 2009 and for imports to fall 8-12 percent.
(Editing by Tomasz Janowski)
((karen.lema@thomsonreuters.com; +632 841-8938; Reuters Messaging: karen.lema.reuters.com@reuters.net)) Keywords: PHILIPPINES ECONOMY/ (If you have a query or comment on this story, send an email to news.feedback.asia@thomsonreuters.com) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
MANILA, Oct 14 (Reuters) - The Philippines, grappling with the economic impact of two devastating typhoons, will keep interest rates low despite a possible uptick in prices, the central bank governor said on Wednesday.
Remittances from Filipinos working overseas, a driver of consumer spending which fuels more than two-thirds of gross domestic product, were likely to grow 4 percent this year from 2008's record $16.4 billion and support growth, Amando Tetangco told reporters at a briefing.
Previous forecasts were for 2009 remittance to grow 3 percent.
'There's enough headroom in case there will be an uptick in the inflation rate,' he said. 'The favourable inflation outlook gives us room to maintain the stance of monetary policy for now.'
The key overnight borrowing rate is at a record low of 4.0 percent. The central bank has cut the rate by 2 percentage points since December last year, but has held it steady since August.
Meanwhile, the government said it will maintain its targeted 2009 budget deficit at 250 billion pesos ($5.4 billion), although this could slip to 300 billion pesos if revenues continued to fall and privatisation of state assets failed.
Finance Secretary Margarito Teves said no decision had yet been taken on how to fund the extra 12 billion pesos expenditure authorised by Congress for typhoon relief, but said if a global bond was issued, it would be for $500 million.
'It looks like right now it might really be a menu (of options),' he said at the same briefing.
He said later that any funds raised could also be used for 2010 requirements.
Agriculture Secretary Arthur Yap said farm sector growth should slip to 0.5-1.5 percent this year from a previously targeted 3-3.5 percent because of the typhoons. The sector accounts for about a fifth of GDP, but other officials said the GDP growth target remained at 0.8-1.8 percent this year.
EXPORTS SLUMP, RECOVERY
Tetangco, the central bank governor, said the fall in the country's exports this year was likely to be more pronounced than previously estimated, but a return to growth was seen in 2010 as the global economy recovered.
He told reporters exports should fall 20 percent this year but grow 7 percent in 2010. Imports, which are dominated by components for electronics goods for export, would fall 17 percent this year and grow 13 percent next year, he said.
Previous forecasts have been for exports to fall 13-15 percent in 2009 and for imports to fall 8-12 percent.
(Editing by Tomasz Janowski)
((karen.lema@thomsonreuters.com; +632 841-8938; Reuters Messaging: karen.lema.reuters.com@reuters.net)) Keywords: PHILIPPINES ECONOMY/ (If you have a query or comment on this story, send an email to news.feedback.asia@thomsonreuters.com) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
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