Sees slower GDP growth of 6.2% in 2014
Higher prices across sectors pose a threat to inflation and could affect overall economic growth this year, a bank economist said.
“The low inflation environment may be threatened as we continue to also be threatened by cost push factors such as possible power rate hikes, transport fare adjustments and higher prices for rice and food owing to the El Niño set to hit this year,” Nicholas Antonio Mapa, associate economist at the Ayala-led Bank of the Philippine Islands (BPI), told The Manila Times.
Mapa explained that the inflation threat could affect purchasing power and slow consumption spending, which has been one of the drivers of the country’s strong economic growth, together with low borrowing costs. Interest rates set by the Bangko Sental ng Pilipinas (BSP) have remained at historic lows.
The BPI economist said he expects GDP to grow at a slower pace of 6.2 percent this year from last year’s above-7 percent performance because of the inflation threat and the fact that this year is not an election year.
Barangay elections were held in October 2013 and the campaign spending boosted gross domestic product growth for the whole year.
“Our forecast for GDP in 2014 is at 6.2 percent, still impressive but a slight deceleration from the above 7 percent in 2013. We expect growth to be above 6 percent. Unlike 2013, 2014 is not an election year, and thus we cannot bank on this added boost in 2014,” he said.
But despite the lower economic forecasts of the BPI, its parent conglomerate Ayala Group, through its property subsidiary Ayala Land Inc. (ALI), recently offered 10-year retail bonds, the biggest offering to date amounting to P15 billion. The first tranche available is at P8 billion.
ALI is raising funds for the construction of leasing projects, particularly malls, indicating its confidence in consumer spending as a key driver of economic growth.
“The Philippine growth engine can continue to chug along at six percent to seven percent for the next few years as Filipinos continue to spend their way to impressive growth numbers,” Mapa said.
“We however lament that the strong growth print enjoyed by the Philippines has not been inclusive, as evidence by the still high unemployment figures,” he added.
He was referring to the recent January unemployment rate rising to 7.5 percent from the previous year’s 7.1 percent because of the effects of Typhoon Yolanda to livelihoods in the Visayas and the high unemployment rate in young age groups.
In a disclosure to the Philippine Stock Exchange on Friday, ALI said the net proceeds from the bond offerings would partially finance the group’s P65.7-billion capital expenditure program this year, mostly on the construction of leasing projects, indicating the group’s optimism about the country’s economic and business environment.
BPI Capital Corp. was one of the lead managers of the ALI bond offer together with other Ayala-led financial institutions such as China Banking Corp., First Metro Investment Corp. and PNB Capital and Investment Corp.
With the Ayala group’s largest bond offering to date, the BPI economist remains optimistic that economic growth will be fueled by consumers still enjoying strong purchasing power because of remittances they receive from family members abroad, which he said would later raise the “demographic dividend” in the country.
With the purchasing power of the public and the government’s drive to boost infrastructure and employment, the Philippines “is set to enjoy a demographic dividend” where the working population is greater than non-working individuals, he said.