Philippine gross domestic product (GDP) will grow between 7 percent and 7.5 percent this year, driven by higher capital investments, First Metro Investment Corp. (FMIC), the investment arm of Metrobank, said on Thursday.
Infrastructure spending, foreign direct investment, consumer spending, remittances and business process outsourcing, are going to be the major growth drivers, FMIC told reporters during a briefing on Thursday.
“The Philippine economy will continue to be robust and outperform its Association of Southeast Asian Nations [Asean] peers in 2017,” FMIC President Rabboni Francis Arjonillo said.
“There will also be a lot of internal and external changes and threats that will impact on the country’s economy, but we are optimistic that given our sound macroeconomic fundamentals and compelling investment story, the country’s economy will remain strong,” he said.
The latest economic forecast is within the 6.5 percent to 7.5 percent official growth target of the government.
The Philippine economy grew by 7 percent in the first three quarters of 2016.
Dr. Bernado Villegas, University of Asia and the Pacific senior vice president, said external uncertainties that the Philippines should watch out for are the slower growth in the European Union and China, the debt burden in emerging markets, the turmoil in the Middle East and North Africa and higher oil prices.
Nevertheless, he said the Philippines could benefit from other external developments such as a possible recession in the United States, the Asean Economic Community assuming growth leadership with India and Sri Lanka, the moderate depreciation of Philippine peso and the demographic winter of developed countries and Northeast Asian economic power houses like Japan and Korea.
“There is so much hype from [US President-elect Donald] Trump. From how I look at him he is going to confuse so many people and that the economy of the US will not grow as much as it has been growing in the last few months. Bernardo said.
“I think there is a 53 percent probability the US will be in for another recession in 2017. Now, that is definitely good for the Philippines being an emerging market because a lot of capital will go back from the US,” the economist emphasized.
The moderate depreciation of the Philippine peso will boost the value of remittances from overseas Filipino workers (OFW) and their families’ spending power which supports the consumer market.
FMIC said OFW remittances continue to grow as the US economy improves by growing 2 percent to 4 percent. The recovery of oil prices will also translate to higher demand for OFWs.
In the first 10 months of 2016, personal remittances totaled $24.43 billion, up 3.9 percent from a year earlier. Cash remittances, on the other hand, reached $22.22 billion, up 4 percent.
Exports are projected to recover and grow by 5 percent to 8 percent, underpinned by the moderate growth of the global economy and a stronger US economy, which accounts for 16 percent of the country’s total exports. Imports, on the other hand, will sustain its double-digit growth of 10 percent to 14 percent driven by robust capital spending and higher oil imports, FMIC said.
The January to October 2016 trade gap expanded by 106 percent to $19.97 billion from $9.67 billion a year earlier. Total merchandise exports in the first 10 months fell by 5.3 percent to $46.44 billion from $49.05 billion. Cumulative imports climbed by 13.1 percent to $66.42 billion from $58.72 billion.
FMIC said the Philippine peso will remain under pressure as the US economy continues to gain traction, leading to a stronger US dollar. The peso is estimated to trade at P51 against the dollar this year.