GDP showing signs of fatigue – HSBC


Banking giant HSBC expects Philippine economic growth to fall short of most expectations for this year as it has begun showing signs of fatigue after eight quarters of above 6 percent expansion.

In a report released on Friday, HSBC pegged the Philippines’ gross domestic product (GDP) growth for the remainder of 2014 at 5.9 percent, explaining that a slowing trend started with the lower-than-expected 5.7 percent growth rate posted in the first quarter.

The bank attributed the slowdown to sluggish government spending, reduced inventories and waning household expenditure. On the supply side, low agriculture production dragged down output, reflecting the lingering effects of Typhoon Haiyan (Yolanda).

HSBC said growth indicators already show that GDP momentum is likely to decelerate further in the second quarter and will result in lower full-year 2014 GDP growth. The beginning of the second quarter saw a contraction in public spending, and both remittances and exports decelerated more than expected, the bank said.

Government disbursements eased 6 percent to P143.6 billion in April, and the expansion in both remittances and exports lost momentum, HSBC explained.

However, data from the Bangko Sentral ng Pilipinas (BSP) showed that as of end-April, remittances reached a cumulative $8.21 billion for the four-month period, up from $7.73 billion recorded for the same period in 2013. Exports swung to a 6.9 percent growth rate in May from a –0.8 percent contraction a year earlier.

Despite this, HSBC said, “We expect second quarter growth to slow further to 5.6 percent year-on-year, taking the full-year forecast to 5.9 percent in 2014.”

The bank’s latest projection is lower than the 7.2-percent Philippine GDP growth in 2013 as well as the 6.5 percent to 7.5 percent target of the government this year. Analysts surveyed by the Times see full-year growth at just under 6.5 percent, with estimates ranging from 6.1 to 6.6 percent.

HSBC explained that supply-side constraints are holding the Philippines back from sustaining above 7 percent growth rates.

“From rice to electricity, more production is needed to keep up with rising demand,” it said.

In the medium and long term, the bank said more investment into agriculture production, electricity generation, and transport infrastructure would help to solve the Philippines’ supply shortages.


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