Investment bank First Metro Investment Corp. (FMIC) and the University of Asia and the Pacific (UA&P) widened their estimated range for Philippine economic growth in the first quarter by half a percentage point on improving global recovery and already robust domestic demand.
They now estimate growth in gross domestic product (GDP) at 6.5 percent to 7.0 percent, against a previous forecast of 6.5 percent for the first quarter of 2017.
“With the global economy led by the US showing signs of greater vitality, this should spill over into the Philippine economy, and given solid domestic demand, we expect GDP growth in Q1 to range between 6.5 percent and 7 percent, with a possible upside surprise,” they said in their latest joint issue of The Market Call released on Tuesday.
Official GDP results for the first three months are due for release on May 18. The government targets growth at
between 6.5 percent and 7.5 percent.
The new estimate figure by FMIC-UA&P compares with a 6.9 percent GDP expansion achieved a year earlier and a 6.6 percent rise in the last quarter of 2016.
Double-digit exports growth
“With the great start in exports in January, external demand should provide additional impetus to the reliably robust domestic demand. Growth in exports in Q1 could expand by double digits,” the think tank said in the report.
After months of tepid growth, export sales kicked off the new year with an all-time high value of $5.1 billion in January, they recalled. This registered a 22.5 percent increase, the highest in 40 months. The favorable outcome arose from higher demand from most export destination countries and significant increases in eight of the top 10 commodities for the month.
“Exports growth in January suggests improving global demand and we believe that this trend will continue in the coming months, which should add vigor to the economy,” the report said.
A highlight of the report was also on expectations of strong consumer spending, with remittances by overseas Filipino workers (OFW) still on the rise and vitality of the manufacturing sector remaining intact.
Personal remittances from OFWs rose 8.5 percent year-on-year to $2.4 billion in January 2017.
The report pointed out strong growth in 14 out of 20 sectors, with nine posting double-digit gains. The expansion of the country’s manufacturing output was sustained as measured by the Volume of Production index at 9.3 percent in January, although slower than the 23 percent increase in December 2016.
“The manufacturing sector’s vitality should likely provide sturdy support to the economy as more foreign direct investments fuel more output and employment in the sector,” the report said.
The investment bank and the think tank said the national government should manage to raise its spending starting in the first quarter.
Government expenditure in January, excluding interest payments, expanded by 11.2 percent, which should have incorporated substantial increases in infrastructure spending. Net primary surplus for the month reached P44.6 billion, a 5.8 percent improvement from the year-ago level.
“We think infrastructure spending should be on track given the formidable team led by former Secretary Rogelio Singson and now continued by Secretary Mark Villar,” the report said.
In addition, FMIC and UA&P said a few big-ticket public-private partnerships (PPPs) have broken ground, including the Calax Expressway, MRT-7 and the Cebu International Airport expansion, among others.
“Note that PPPs are now included in Private Construction, and so will be in addition to NG’s (national government’s) infrastructure and capital outlay budget,” the report added.