The United Nations Economic and Social Commission for Asia and the Pacific (Unescap) projects the Philippine economy would grow by 6.7 percent for the whole of 2014, because of the accelerated reconstruction efforts in areas affected by Super Typhoon Yolanda.
In its “2013 Year-end Update of Economic and Social Survey of Asia and the Pacific” released on Thursday, Unescap said that other than the rally in reconstruction efforts, increased remittances by overseas Filipino workers (OFWs) would be a “stable source of support for the Philippine economy.”
“The Philippines is projected to grow by 6.7 percent in 2014 and could see further acceleration due to reconstruction activities in the aftermath of Typhoon Yolanda [international name of Haiyan],” the development organization said.
“Furthermore, remittances will continue to serve as a stable source of support for the Philippine economy given the better outlook for receiving countries as well as the general lack short-term volatility in remittance flows,” it added.
Unescap also said that consumer confidence and spending would be sustained by “modest inflation” as well as “solid employment conditions and accommodative macroeconomic policy stances.”
The international organization said that the super typhoon would not affect much of the country’s high-paced GDP growth, but the main concern is still the high number of individuals unemployed and “relatively low investment level compared to other similarly Southeast Asian economies.”
“But the prospects are positive in 2014, despite the losses resulting from Typhoon Haiyan in 2013,” Unescap said.
The agency’s projections were based on the above 7-percent GDP growth in the last four quarters until the third quarter this year, fueled by remittances, benign inflation and relatively low deficit at 2 percent of GDP, which “allowed substantial government spending in infrastructure and other basic services.”
“Among the major economies with large domestic markets in the region, a bright spot has been the performance of the Philippines. The economy has seen its highest growth in years—above 7 percent in the last four quarters through the third quarter of 2013,” Unescap said.
“The role of remittances in supporting buoyant domestic consumption in the country has been important. The latest available figure suggests that until October 2013, the Philippines had received remittances of about $26.1 billion, which constituted 9.8 percent of GDP,” the organization said.
“Investment has also benefited from a supportive policy environment. Inflation has remained benign, offering the opportunity to support growth through accommodative monetary policy. In the Philippines, a relatively low budget deficit [2 percent of GDP in 2013] has also allowed for substantial government spending in infrastructure and other basic services,” it added.
Though bright prospects for the economy are seen next year, Unescap assessed that the Philippines is one of the countries that could cut down its GDP in a worst-case scenario, because of the United States Federal Reserve deciding to taper its bond-buying program by $10 billion a month starting January.
“[Unescap] analysis suggests that under a worst-case scenario, the effects of capital volatility due to ‘tapering’ [by the US Fed]could cut GDP growth in the most affected countries in the region—Malaysia, the Philippines, the Russian Federation and Thailand—by up to 1.2 to 1.3 percentage points in 2014,” the organization said.