IMF: Weak exports weigh on Q1 GDP

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The International Monetary Fund (IMF) estimates first-quarter growth in the Philippine economy gained pace from a year earlier, but slackened from the preceding quarter given weaker exports.

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In a press briefing on Thursday, IMF Resident Representative Shanaka Jay Peiris said domestic demand fueled by low oil prices likely pushed Philippine gross domestic product (GDP) up in the first quarter of 2015 from 5.6 percent posted in the corresponding period in 2014.

“Declining oil prices are generally good. So we think domestic demand was stronger in the first quarter,” Peiris told reporters.

However, weaker manufacturing output and exports may have pulled down GDP from a growth rate of 6.9 percent in the last quarter of 2014, he said.

“Domestic demand remains strong but the weaker manufacturing and exports story suggests that growth overall is stronger than the first quarter of last year but probably may not be as strong as the fourth quarter of 2014,” Peiris added.

Aggregate merchandise exports in the first two months of 2015 dropped 1.8 percent to $8.869 billion from $9.036 billion in the corresponding period of last year.

Philippine manufacturing, on the other hand, registered growth of only 3.3 percent in January – its slowest since April 2014 – from 4.4 percent in the same month last year.

In February, factory output grew at a slower pace of 4.4 percent compared with 6 percent growth recorded a year earlier.

‘Full-year growth 6.7%’

For full-year 2015, the IMF expects GDP growth of 6.7 percent “due to lower commodity prices, higher public spending and continued strong private construction and export growth.”

As it stated at the conclusion of its staff mission to the Philippines in March, the IMF remains bullish on the Philippine economy this year but it also urged the government to continue to improve its spending, particularly on infrastructure and human capital.

Despite the rosy projection, the IMF said there were still risks to its baseline outlook from both external and domestic sources.

It said disruptive asset price shifts in financial markets due to asynchronous monetary policies in advanced economies remained a risk, although it noted that the Philippines’ strong fundamentals would provide a cushion.

On the domestic front, preemptive policy moves by the Bangko Sentral ng Pilipinas (BSP) in 2014 have resulted in more moderate liquidity and credit growth, reducing financial stability risks, it said.

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