PH economic growth seen at 6.1%-7.6%


Philippine economic growth likely accelerated in the first quarter of 2016 compared with the same period a year earlier, as a rebound in manufacturing and strong domestic consumption should have more than offset weaker exports and agricultural losses due to El Niño, analysts polled by The Manila Times said.

Gross domestic product (GDP) may have expanded by 6.1 percent to 7.6 percent in the January to March period, they said, up from the 5 percent recorded a year earlier.

Growth was recorded at 6.3 percent in the previous three-month period. Official first-quarter GDP data is scheduled to be released this Thursday by the Philippine Statistics Authority (PSA).

The government has set a GDP growth target range of 6.8 percent to 7.8 percent this year, higher than the 5.8 percent full-year growth in 2015.

Analysts’ estimates
ANZ Research economist for Asean and Pacific Eugenia Victorino was the most optimistic among the analysts polled, estimating GDP growth at 7.6 percent in the first three months of the year, boosted by faster than expected growth in private consumption and improved factory output in the first quarter.

“Import growth remained robust indicating the persistence of an above-trend rise in household consumption. This was also complemented by the surge in the growth of industrial production,” she said.

Banking giant HSBC offered a forecast of 7.4 percent for the quarter but did not offer any explanation.

The private think tank of investment bank First Metro Investments Corp., (FMIC) and the University of Asia and the Pacific (UA&P) said GDP likely grew by more than 7 percent in the three months to March, driven by higher electricity rates, expansion in manufacturing output and a jump in capital goods imports.

“The Philippine economy should have easily expanded by more than 7 percent in the first quarter of 2016, despite a possible 5 percent decline in agriculture due to the El Niño drought,” it said.

Bank of the Philippine Islands associate economist Nicholas Antonio Mapa, meanwhile, estimated a 6.9-percent expansion for the first quarter on strong domestic consumption on low interest rates and inflation.

“Investments are expected to deliver growth as car sales have been strong although real estate sales have slowed. Government spending also picked up, which is seen to offset the poor performance of the trade sector,” Mapa said.

Joey Cuyegkeng, senior economist at ING Bank Manila, forecast GDP for the three-month period to come in at 6.6 percent, as manufacturing indicators exhibit buoyant industrial activity while government spending is outstripping spending growth during the period.

“Election spending is also a boost to the economy. Structural inflows together with a weaker USD/PHP average in first quarter add to spending power. Private sector investments are expected to remain strong,” he said.

Cuyegkeng noted that these indicators would more than offset contraction in agriculture production, which El Niño has badly affected.

Ateneo de Manila economist Alvin Ang expects GDP growth in the first three months to have risen to 6.4 percent “due to better government spending and manufacturing performance.”

Gundy Cahyadi, Singapore-based DBS economist, forecast January to March growth of 6.1 percent, supported by domestic demand.

“As long as consumption and investment growth stays strong, we remain optimistic that GDP growth will return to 6 percent this year. That there has been a frontloading of investments before this year elections seems to have caused the spike in imports in first-quarter 2016. And imports of capital goods are still growing strong, indicative of sustained growth in domestic investments,” he said.

Moody’s Analytics said growth could have hit 6.2 percent in the quarter ending March, leaving the Philippines with the best-performing economy in Southeast Asia.

“Unlike its regional counterparts, the Philippine economy has overcome the negative effects from slowing global demand. Although the archipelago’s exports have been falling, private consumption and investment activity are expected to remain strong,” it said.

The main driver will be domestic demand, which has been resilient in the face of external weakness, and consumption and investment activity should grow strongly. Exports will be weak on account of soft global conditions, it added.

Offering the same forecast is Standard Chartered Bank economist Jeff Ng, who said the second-round effects of government spending may also have boosted investment and household consumption.

“Three factors are likely to cushion external headwinds from goods exports this year: services exports, domestic growth, and room for fiscal support. Household consumption will likely be supported by solid labor-market fundamentals and elections-related spending,” he said.

Providing the least optimistic view is Metrobank Research, which said the Philippines likely grew by just 6.1 percent in the March quarter.

“Growth drivers will be still solid consumption spending (amid low inflation and interest rates), sustained pickup in government (on the back of election spending), steady services sector, and rebound in the manufacturing subsector,” it said.

The main drag to GDP is expected to still be external trade amid the slump in exports during the quarter, it said.

“Exports were largely affected by the stronger US dollar and the weak demand from some of the Philippines’ major trading partners, especially China. On the supply side, the agricultural sector is seen to remain in the red amid the impact of El Niño on crop production,” it added.


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