By MAX ESTAYO

Standard Chartered Bank said Philippine growth this year would likely drop by more than half to 4.1 percent from 7.3 percent last year.

Simon Wong, regional economist of StanChart said slower growth would result from weak exports and weaker consumption spending.

Wong also cautioned that any wage increase that may top 10 percent would create a wage spiral and spin inflation out of control.

Wong estimated that growth for the first quarter remains robust at 5.5 percent but will contract to three percent by the second quarter, inch up to 3.5 percent by the third quarter and 4.4 percent in the last quarter buoyed by seasonal surge in consumption.

Wong said due to higher food and oil prices, inflation will pick up to 6.2 percent from 2.8 percent. He said the rate might peak to 8.1 percent in the second quarter.

In the meantime, Wong said the Bangko Sentral ng Pilipinas is likely to keep its rates steady at five percent until the end of the year, resuming easing only in the first quarter of next year.

Wong said the Philippines is not likely to "decouple" from the US recession and exports will take a hit.

"You can see from the numbers that it’s not just the Philippines but other Asian economies are slowing, so demand for electronics, which make up 66 percent of Philippine exports, will slow," Wong said.

"Also, there are increasing signs that domestic economy is feeling pinch. Domestic demand is starting to slow specially with food prices going through the roof, consumers will spend more on food, which is 20 percent of spending. If you spend more on food, you have to cut back on other spending. This will hurt the economy as a whole," the Hong Kong-based economist said.

Wong said the bank’s inflation forecast only factors in a 10-percent increase in wages and warned that an adjustment of more than that will create a wage spiral and spin inflation out of control.

"A double-digit increase is alarming although an adjustment of close to 10 percent is still reasonable," Wong said.

The 6.2 percent inflation forecast was a revision from five percent the bank projected earlier.

Wong said this year the peso is expected to remain broadly stable and end at 43 to the dollar.

"The demand from US is clearly showing down very rapidly, there’s an impact on peso," the economist said.

Wong said there’s likely a fiscal slippage this year on increased government subsidy to rice purchases.