The Philippine economy may miss the government’s full-year target for 2014 but still remains on track for a robust 7 percent expansion in the second half, supported by the government’s commitment to ramp up public spending and improving exports, a joint think tank report said.
First Metro Investments Corp. (FMIC) and the University of Asia and the Pacific (UA&P) said in the October issue of The Market Call that they expect the country’s gross domestic product (GDP) to grow between 6.5 percent and 7 percent in the last six months of 2014.
“We expect a ratcheting up of national government spending as President Benigno Aquino 3rd has shown a rare displeasure over the spending slowdown and as the reconstruction work in Yolanda-afflicted areas go into full swing. Besides, there is no shortage of infrastructure projects, for which funds are available,” they said.
The government’s fiscal performance in August showed a reversal of trends in the fiscal deficit over the past two months, the report said.
It noted that the government recorded its second highest surplus since January this year of P29.9 billion, representing a 36 percent year-on-year increase or P8 billion in surplus over a year ago, driven by faster growth in revenue collections than disbursements.
“Recall that in the previous months, national government public spending slowed down amidst the commotion over the unfavorable Supreme Court ruling on the government’s Disbursement Acceleration Program,” it said.
The narrowing of the year-to-date deficit to P25.9 B from the comparable figure in 2013 gives the government broader fiscal leeway in its provisions for investment projects, especially infrastructure projects, needed to promote economic growth.
However, the FMIC and UA&P said they are a little bit more upbeat with regard to exports.
“With the US economy humming, [Philippine] exports should continue to rise at a double-digit growth pace,” they said.
Philippine exports in August rose 10.5 percent to $5.474 billion from $4.956 billion a year earlier, the latest official data shows.
“Upbeat global manufacturing activity and a bullish exports outlook for agro-based products, along with the lifting of the truck ban, should help sustain growth in exports,|” they said.
FMIC and UA&P added that their optimism was also underpinned by an anticipation of solid growth in the US economy and further improvement in the European Union and China.
Despite this, they said that the projected second-half GDP growth for the Philippines may not be enough to drive the local economy to the full-year target of the government.
“In short, we still see 6.5 percent to 7 percent second-half growth in GDP, which would put the full-year expansion at slightly below the lower end of the government’s 6.5 percent to 7.5 percent target,” they said.