Econ­omy off to a good 2016 start–think tank

Business Mirror - - FRONT PAGE - By Cai U. Or­di­nario

ELEC­TION spend­ing and low in­fla­tion will ac­cel­er­ate eco­nomic growth in the first quar­ter of 2016, ac­cord­ing to a lo­cal think tank.

In its lat­est Mar­ket Call re­port, First Metro In­vest­ment Corp.-Univer­sity of Asia and the Pa­cific (FMIC-UA& P) Cap­i­tal Mar­kets Re­search said GDP growth in the Jan­uary-to-March pe­riod in 2016 will be faster than the 6.3 per­cent posted in the fourth quar­ter of 2015.

“We think GDP should ex­pand at a faster pace in Q1 2016, as the govern­ment keeps the taps open as elec­tion day nears, con­sumer spend­ing is still strong, es­pe­cially when com­pared to a fairly low base in the same quar­ter last year. The econ­omy should slow down in the third quar­ter, but re­sume its ro­bust growth in the fourth quar­ter,” the think tank said.

The re­search group is also keep­ing its full-year GDP growth fore­cast of 6 per­cent to 6.5 per­cent on the back of higher spend­ing and low oil prices, which will keep in­fla­tion low amid the wors­en­ing El Niño.

In­creased govern­ment spend­ing this year, the think tank added, will not reach the tar­get bud­get deficit of 2 per­cent.

How­ever, it is in the process of re­vis­ing its in­fla­tion fore­cast down­ward on ac­count of the low oil prices. In Jan­uary the think tank es­ti­mated that in­fla­tion will av­er­age 2.5 per­cent this year.

The FMIC-UA&P Cap­i­tal Mar­kets Re­search said crude-oil prices have been below $30 per bar­rel in most of Jan­uary. This will help cush­ion the im­pact of El Niño

and elec­tion spend­ing on in­fla­tion.

“Given the be­nign in­fla­tion out­look and the weak global econ­omy, we think that the BSP [Bangko Sen­tral ng Pilip­inas] will keep pol­icy rate and SDA [Spe­cial De­posit Ac­count] rate at their present level for the year, ex­cept pos­si­bly in De­cem­ber, when some signs of higher in­fla­tion may ap­pear more firm,” the think tank said.

FMIC-UA&P Cap­i­tal Mar­kets Re­search also said that, de­spite global un­cer­tain­ties, the coun­try’s ex­ports will slightly im­prove in 2016.

The growth of the coun­try’s ex­port earn­ings has been ane­mic in 2015. Ex­port re­ceipts con­tracted 5.6 per­cent to $58.65 bil­lion in 2015, from $62.1 bil­lion in 2014.

The group said the weak global econ­omy will make the peso com- pe­t­i­tive this year. This au­gurs well for both ex­porters sell­ing goods abroad and over­seas Filipino work­ers (OFWs) send­ing dol­lars home.

“Rel­a­tively weak ex­ports and OFW re­mit­tances com­pared to the past, and the US econ­omy poised to ex­pand fur­ther, al­beit at a his­tor­i­cally lower tra­jec­tory, should con­tinue to pres­sure the peso. How­ever, we ex­pect greater volatil­ity since the US growth may not be lin­early up­ward bound,” the group said.

Last year govern­ment un­der­spend­ing in the first half of the year, weak ex­port earn­ings and lack­lus­ter per­for­mance of the agri­cul­ture sec­tor damp­ened the coun­try’s GDP growth. The econ­omy merely posted a full-year growth of 5.8 per­cent, the slow­est since 2011, when the econ­omy only grew 3.7 per­cent.

The econ­omy grew 6.3 per­cent in the fourth quar­ter, pre­vent­ing the govern­ment from meet­ing its re­vised 6-per­cent to 7-per­cent growth tar­get for 2015.

The fourth- quar­ter GDP was driven by the Ser­vices sec­tor, whose growth ac­cel­er­ated to 7.4 per­cent from 5.6 per­cent, while In­dus­try de­cel­er­ated to 6.8 per­cent from 9.1 per­cent.

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