Warn of further risk – power crisis, global slowdown, market volatility
Revised estimates of 2014 Philippine economic growth by private analysts following the surprise drop in the third-quarter expansion place the full-year rate below 6 percent and significantly farther from the government’s 6.5 percent minimum target for the year.
An emerging consensus is for gross domestic product (GDP) growth of 5.9 percent this year, with the setback from the 5.3 percent GDP gain posted for the July to September quarter factored in.
Analysts expect a slow pick-up in government spending in the fourth quarter despite efforts to accelerate disbursements.
They also see moderate private consumption offsetting negative growth in fiscal consumption.
DBS, HSBC, Maybank agree on 5.9%
In a research report, analysts at Singapore banking giant DBS now expect 2014 GDP growth to come in at 5.9 percent, down from their previous forecast of 6.4 percent.
“The pace of fiscal disbursement will be the key in the fourth quarter of 2014. Expect fiscal disbursement to accelerate from October onward,” the DBS report said.
Despite the acceleration of spending plans in the fourth quarter, however, questions remain about problems of procurement, as well as delays in projects traced to the controversy surrounding the Disbursement Acceleration Program earlier this year.
In a separate report, banking giant HSBC retained its 5.9-percent growth projection for the Philippines this year on the back of a contraction in government expenditure.
Despite this, Trinh Nguyen, economist at HSBC, said the bank is optimistic about Philippine private consumption.
Nguyen noted that private consumption is the most resilient component of Philippine GDP, as well as the most stable, even when compared with that in other Southeast Asian countries.
“This is thanks to steady inflows of remittances, sustaining the demand of households in the Philippines for key items such as food and housing, water and electricity,” she said.
“The Philippines has a favorable demographic transition: in the future, it will have more able workers, fewer dependents, providing a favorable environment for the economy to expand. The problem is that investment, especially public spending on key infrastructure needs, is not growing fast enough,” the economist added.
With government spending expected to normalize only next year and more moderate expectations for private consumption this year, Maybank Kim Eng said it has also lowered its GDP forecast for the country to 5.9 percent from 6.7 percent.
“Consumer inflation has been on a downtrend since August, largely because food inflation has been declining. As commodity prices fall, including crude oil prices, we expect improving purchasing power to bolster private consumption. This may start to become evident in the fourth quarter of 2014,” said Maybank Kim Eng analyst Luz Lorenzo.
Metrobank sees strong manufacturing
Meanwhile, analysts at Metrobank Research said their full-year average growth forecast of 6 percent will show a strong downward bias if the current trend in spending continues into the fourth quarter.
“As expected, weak government and investment spending continues to dampen GDP growth. (But) the manufacturing subsector continues to post a stellar performance as it seems industries have adjusted to the effects of external shocks,” the research report said.
The analysts see consumption spending picking up in the fourth quarter amid easing inflation and higher demand due to the holiday season. The manufacturing sector is also expected to cap the year strong amid the expected pick-up in domestic demand.
“Risks to the domestic economy, nonetheless, remain amid the persistent port congestion issues, looming power supply crisis, slowing global economy, and the impact of financial market volatilities,” they warned.