Economy off to a good 2016 start–think tank
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.