By Eileen A. Mencias

Banco de Oro Universal Bank, the country’s largest bank, expects Philippine economic growth to slow down slightly this year.

“In contrast with most of the other affected economies in the region, the Philippines may yet avoid a full-blown economic recession,” said BDO chief market strategist Jonathan Ravelas.

“Mostly likely, the country could see a better inflation figure in 2009 to average the year at 8.50 percent on lower commodity prices expectation. The economy is seen to grow by 4.00 percent in 2009 from increased government spending needed to pump-prime a slowing economy,” he said.

The bank sees growth in consumer spending slowing to 4.7 percent this year from 5.4 percent in 2008 and that of gross fixed investment decelerating to 9.8 percent from 13.2 percent.

“2008 is a year of reversals,” Ravelas said. “The year 2009 will be characterized by sharp corrections and increased volatilities.”

Despite the easing in monetary policy, Ravelas said “interest rates will remain elevated but still at single digit at 6.75 percent.”

The central bank eased monetary policy in November when it cut the reserve requirement by two percentage points and again in December when it reduced its key interest rates by 50 basis points.

Meanwhile, Ravelas said the peso would range between 45 and 52 against the US dollar this year.

“The currency will remain volatile,” Ravelas said.

The peso has recently rallied to around 47.70 to 48.00, slightly off the year’s low at 50.17 and broadly in line with the cumulative depreciation of the Korean won, the Indonesian rupiah, the Thai baht and the Malaysian ringgit.”

The peso, which closed at 47.52 at the end of 2008, is seen by the government to range between 45 to 48 this year.