GDP may still grow 7% in 2017 – FMIC, UA&P

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GROSS domestic product (GDP) growth could hit 7 percent this year despite the slower-than-expected 6.4 percent print in the first quarter, according to the latest issue of The Market Call released Monday.

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“Despite the lower-than-expected Q1-GDP growth primarily due to a high base a year ago and the mining closure fiasco, it remained only slightly lower than the 6.6 percent tally in Q4-2016,” First Metro Investment Corp. (FMIC) and the University of Asia and the Pacific (UA&P) said in The Market Call.

“Thus, we maintain our forecast of 7 percent (or higher) full-year economic expansion in 2017, anchored on the revival of exports, the agriculture and manufacturing sectors,” FMIC and UA&P added.

The forecast for the whole year is higher than the 6.9 percent GDP in 2016. The government has set a growth target 6.5 percent to 7.5 percent this year.

“Likewise, we believe that infrastructure spending in the next quarters will gear up to a faster pace and provide a further booster for growth,” FMIC and UA&P noted.

Exports are expected recover at a faster pace as global demand improves, further adding impetus to fast-growing domestic demand.

Exports grew by 21 percent in March. Shipments have been growing by double-digits since the start of the year, driven by sterling performance of the five top commodities. Total export receipts reached at $5.6 billion.
The remarkable gains in exports resulted in a robust first quarter growth of 17 percent, the fastest in 13 quarters, The Market Call noted.

“We also maintained our view that the manufacturing sector’s vitality, which coupled with higher foreign investments into productive activities, should help sustain the economy’s growth momentum in 2017,” it said.
Strong double-digit gains in eight out of 20 sectors resulted in the continued expansion of the country’s manufacturing output (measured by the Volume of Production Index or VoPI) to 11.1 percent in March, higher than the 10.7 percent in the previous month. The positive gains recorded in the past three months brought the first quarter growth to 9.6 percent.

“We believe that the roll-out of big-ticket PPP [public-private partnership] projects and the proposed tax reforms will result in an acceleration of the country’s economic growth in H2,” according to The Market Call.

Other analyst forecasts

Most multilateral, private financial and research institutions also retained their growth forecasts for the year after the first-quarter GDP numbers were released.

The World Bank retained its 6.9 percent growth projection, taking into consideration the contributions of inflation, remittances, fiscal policy and credit growth.

ANZ Research kept its growth forecast at 6.9 percent, despite the lower-than-expected performance in the first quarter, saying overall growth is strong and balanced.

London-based research consultancy firm Capital Economics noted the economy is likely to continue growing at a solid pace of 6.5 percent, while DBS and IHS Markit maintained their respective forecasts at 6.4 percent.

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