Yolanda could temper 2014 growth to 6.8%

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Increased investment and government spending will boost the economy by 6.8 percent this year, a European group of accountants forecasts, reflecting growth that is tempered by the impact of last year’s Super Typhoon Yolanda on livelihoods in the central provinces.

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The Europe-based Institute of Chartered Accountants in England and Wales (ICAEW) took a more conservative stance in forecasting the Philippines’ economic growth, compared with the 7.0-percent to 9.0-percent projected on Tuesday by economist Dr. Bernardo Villegas, chairman of the Center for Research and Communications.

Villegas sees a rapidly growing domestic market and the revival of the country’s manufacturing industry helping fuel GDP growth of 7.0 percent to 9.0 percent in the next five to 10 years.

But ICAEW, in its The “Economic Insight: South East Asia”, said the Philippine economy likely to “hold back growth” in 2015 because of lack of infrastructure development, high levels of poverty and unemployment.

Partly echoing the projection of ICAEW is the February issue of The Market Call, which sees a 5.8-percent to 6.0-percent gross GDP growth for the first quarter of this year.

Douglas McWilliams, ICAEW chief economist, said the basis for their 6.8-percent GDP growth projection is the destruction of rice and sugar crops by Yolanda [international name Haiyan].

The destruction of the crops and farmland by Yolanda in parts of the Visayas will lead to “a short-term drag on food production,” he said.

“Overall, annual food price inflation is expected to increase to approximately 4.0 percent in 2014, up from 2.8 percent in 2013, before falling to 3.0 percent in 2015 and 2016,” McWilliams said, also citing higher food price inflation prospects for the Southeast Asian region in 2014.

“For the Philippines, food cost will increase this year as the nation recovers from agricultural damages caused by typhoon Haiyan. However, this is likely to return to lower levels in the longer term,” the report added.

In the February issue of The Market Call, Financial firm First Metro Investments Corp. (FMIC) and the University of Asia and the Pacific (UA&P) said they see a lower 5.8-percent to 6-percent GDP growth for the Philippines in the first quarter of this year, because supply chains and incomes disrupted by Yolanda have yet to normalize.

FMIC President Roberto Juanchito Dispo said in the February issue of the publication that despite the lower growth production for the first quarter, he sees the Philippine economy going back to “its 7-percent growth path beyond the first quarter.”

The Market Call is published monthly by FMIC and UA&P.

“The negative impact of Super Typhoon Yolanda on the economy is not likely to dissipate in early 2014, but a strong rebound may be expected for the rest of the year to keep full-year growth above 7 percent once again,” Dispo said.

The publication also said that the manufacturing sector would help drive growth for the first quarter, because of the demand for construction materials needed for reconstruction efforts of Yolanda-hit areas and development of property projects by the private sector, and improved exports, particularly electronic products.

“Pre-planned infrastructure spending as well as new money for reconstruction, especially from foreign aid, should propel public construction spending in first quarter,” it added.

Inflation concerns

On concerns toward inflation, Dispo said that the figure for the first quarter is “unlikely to go beyond 4.2 percent” but is expected to ease as the country’s farming sector would post a rebound and provide adequate food supply for the second quarter, that will result to a slight decrease in food and commodity prices.

“Also, power generation from the typhoon battered geothermal fields in Leyte should be on its way to 100 percent of the 600-megawatt capacity by the end of first quarter. Crude oil appears to have limited upside risk, despite supply disruptions in Libya, Nigeria and Iran. These are deemed to be temporary,” the FMIC president said.

Sought for comment by The Manila Times, Summit Securities Inc. President Harry Liu said in a phone interview that FMIC and UA&P’s first quarter growth projections are realistic.

But he said that beyond the first quarter, “government spending on Yolanda rebuilding, various infrastructure being done and strong 2014 net income releases of firms,” will help boost economic growth.

He added that construction spending by both the government and the private sector will help give “momentum” to the economy.

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