First Metro Investments Corp. (FMIC) and the University of Asia and the Pacific (UA&P) expect a slow down in the country’s fourth-quarter gross domestic product growth because of the effects of Super Typhoon Yolanda and decline in electricity sales by the Manila Electric Co. (Meralco).
“Meralco electricity sales in October show a marked slowdown, a portent of the outlook for the rest of fourth quarter. Thus, we expect GDP [gross domestic product]growth in the fourth quarter to hover around 6 percent,” FMIC President Roberto Juanchito Dispo said in The Market Call monthly economic report released on Monday.
The Market Call is jointly published by FMIC and UA&P.
“Nonetheless, the anticipation of strong electricity demand from various construction projects [e.g. 120-hectare Entertainment City, completion of residential condominium projects], the expansion of [business processing outsource]sectors, and the possible recovery of exports should boost Meralco electricity sales in fourth quarter, albeit at a slower rate than third quarter,” he added.
Dispo remained positive though, saying that though the inflation is seen to rise and GDP to slow down by fourth quarter, these will not happen in the succeeding quarters.
“The devastation caused by Super Typhoon Yolanda is
expected to slow down growth in fourth quarter, and at the same time pressure inflation upwards. However, these negative effects are likely to last only for a quarter,” Dispo said.
“Super Typhoon Yolanda is likely to put an end to the [above-7-percent economic] streak in fourth quarter, but since the affected areas are predominantly and roughly accounts for 12 percent of GDP, reconstruction work in 2014 should put back the economy in the fast lane,” he added, given the P361-billion Reconstruction Assistance on Yolanda, or RAY plan.
According to the FMIC chief, inflation would “likely hit 4 percent by December” that would result in a 3.6-percent average for the fourth quarter of 2013, attributing this to the steep increase in food prices after the super typhoon, “while crude oil prices have remained relatively stable.”
“National government is expected to hasten the pace of spending in the last two months of the year, but the deficit to GDP ratio will not likely exceed 2 percent,” he said.
“There is also considerable uncertainty with respect to fourth quarter output, for although the devastation caused by Super Typhoon Yolanda was extensive, the affected areas were mostly agriculture-based,” he added.
But Dispo said that exports would continue to recover in the fourth quarter, citing the positive view on the manufacturing sector of the export markets from the Global Economic Monitor Report, and the double-digit improvement of the volume of production index, which measures factory output in the country.