Philippine GDP growth to reach 4.2% in 2012

But this is only if the global external demand will start to stabilize by mid-2012.

According to DBS, 4Q11 GDP is unlikely to provide much lift to overall growth for 2011.

Here’s more from DBS:

We expect growth in 4Q to reach 3.6% YoY, taking full-year growth in 2011 to 3.6%. In sequential terms, this implies growth of 0.3% QoQ (sa), unchanged from the preceding quarter. Although the economy will continue to be buffeted by external headwinds, the impact should not be as bad as the global financial crisis in 2008/09.

GDP growth of 4.2% has been penciled into our forecast for this year on the assumption that the global external demand will start to stabilize by mid-2012 and government spending will be accelerated.

The swings in external demand will remain the most important factor in determining GDP growth this year. In the 11 months ending November, exports slumped by 6%, led by the all-important electronics manufactures, which fell by 31%. In real terms, this has translated into exports declining by 4% in the first three quarters of the year. With the export numbers from October and November still showing contractions, the figure for 4Q is unlikely to be much to cheer about.

Unfortunately, the export outlook for 1H still appears cloudy. Uncertainty about the Eurozone debt crisis and slowing global growth will continue to weigh on external demand. Net exports will contribute -1.4 pct-pt to headline growth in 2012, a smaller drag than the projected 3.0 pct-pt for 2011.

An expected acceleration in government spending in 2012 is a key reason why we see growth higher this year as compared to 2011. Under more stringent budget disbursement rules, the budget deficit for 2011 was around PHP192 bn, far short of the PHP 260 bn planned deficit for the year. However, this situation should change in 2012.

Encouragingly, there have been clear signs that government spending have been ramping up in the last few months of 2011. Moreover, the much-touted private-public partnership (PPP) projects should also play a part in boosting government spending this year.

Coupled with the announcement of the PHP 72bn fiscal stimulus in October, government consumption is expected to contribute over 1-pct pt to headline growth in 2011, in contrast to an estimated 0.2 pct-pt in 2011.