Consumption to buoy economy amid election-related cooling of investment
Singapore-based banking giant DBS maintained its growth forecast of 6.1 percent for the Philippine economy this year, saying that robust private consumption should offset any drag from an anticipated slackening of investments ahead of the May elections.
In a report, DBS said the expansion in investment would moderate amid concerns about possible delays in some government projects ahead of the elections.
However, the bank said private consumption, which remains robust at an above 6-percent growth rate would continue to provide underlying support to the economy.
“We maintain our GDP [gross domestic product]growth forecast at 6.1 percent for this year,” it said.
The banking giant’s growth forecast fell below the government’s official 7 percent to 8 percent target but higher than the 5.8 percent result in 2015.
Noting private consumption’s robust growth of 6.2 percent in 2015 driven by strong discretionary spending, it expects private consumption growth to remain at about 6 percent this year.
DBS also dismissed concerns that the agriculture sector may come under supply pressures in early 2016 and weigh on consumption growth, particularly in rural areas.
“Any drag [from agriculture]is likely to be very limited, as the manufacturing and services sectors are expected to remain strong,” it said.
DBS pointed out that the robust consumption growth seen in 2015 came in spite of a mere 0.2 percent growth in the agriculture sector, suggesting that the sector is no longer as important as it used to be in driving the economy.
“Besides, we expect positive spillover impact from the election campaign on consumption growth,” it added.
On a less upbeat note, the bank said there may be a slight moderation in investment growth ahead of the elections this year.
It noted that local corporates might choose to delay investment plans until after the new government is set up.
DBS pointed out that investment growth jumped 22.5 percent in the fourth quarter of last year, which suggests that some frontloading of investment purchases might have happened.
“Nonetheless, the outlook remains positive. Imports of capital goods continue to grow at double-digit pace, a clear indication that investment growth remains strong,” it said.
The bank also noted that while large swings in investment growth are typically driven by construction, the main driver for the 22.5 percent jump in investments in the fourth quarter of 2015 was durable equipment purchases.