GDP growth to be sustained but below official target
The economy will keep growing this year but at a pace below the official 7 percent to 8 percent target, First Metro Investment Corp. (FMIC) said, with market uncertainty seen limiting the expansion to 6 percent to 6.5 percent.
“Our outlook for the Philippines remains optimistic but guarded due to some uncertainties in the local financial markets and global economic weakness,” First Metro President Rabboni Francis Arjonillo said in a briefing on Wednesday.
The investment banking arm of the Metrobank Group said the uncertainties could come from geopolitical instability—particularly in the Middle East countries and the terror threat from ISIS, erratic growth in the eurozone, China’s slowdown, a strengthening United States economy and the upcoming May national elections.
Still, the projected 6 percent to 6.5 percent gross domestic product (GDP) growth this year will be among the highest in the region, FMIC claimed, driven by sound macroeconomic fundamentals, robust domestic consumption fueled by overseas Filipino workers’ (OFW) remittances and the growing outsourcing sector, a stable Philippine peso weighed against other regional currencies, moderate inflation and declining oil prices.
“The faster implementation of public infrastructure projects, continuing private construction, strong domestic consumer demand, heightened election-related spending, and better exports will provide boost to GDP growth in 2016,” Arjonillo said.
FMIC said the moderate inflation environment would persist as prices of rice and other major food items stay stable along with declining fuel prices.
Inflation was forecast to average at 2.5 percent, higher than 2015’s 1.4 percent and falling within the government’s target of 2 percent to 4 percent.
This is despite the effects of the El Nino weather phenonomenon on agricultural output, FMIC said, which will be cushioned by lower world oil prices and increased rice imports.
While OFW remittances will continue to be a major driver of the economy, FMIC said growth would moderate to the range of between zero and 2 percent this year as oil-producing countries suffer from declining crude prices.
“Nonetheless, the demand for skilled manpower overseas will remain steady,” Arjonillo said.
Funds coursed through banks for the January to October 2015 period grew by 3.7 percent to $20.64 billion from a year earlier, latest central bank data showed.
Exports, meanwhile, are projected to pick up to a range of 5 percent to 8 percent as the US economy continues to recover, while imports are likely to grow by 2 percent to 5 percent.
As of October 2015, exports were down 6.2 percent to $48.87 billion from the comparable 2014 period, while imports totaled $56.527 billion during the 10-month period, up 3.9 percent from a year earlier.
FMIC said the US dollar would further strengthen as a result of an improving US economy. It forecast the Philippine peso to trade within P48 to P49 against the greenback this year.
Infrastructure spending, meanwhile, is projected to grow by 4.5 percent to 5 percent on expectations of smooth and faster implementation of big ticket public-private partnership (PPP) projects.
The state agency in charge of PPPs has said that at total of 55 projects were in the pipeline, of which 10 have been awarded and two up for contract signing.
Sixteen projects, meanwhile, have been approved by the National Economic and Development Authority Board, while the remaining are in various pre-approval stages.