WORLD BANK HIKES FORECAST Top end of growth target in sight

THE PHILIPPINE ECONOMY will likely hit — and could even exceed — the top end of an official 6-7% target for the year, the National Economic and Development Authority (NEDA) announced yesterday.

“[ T] he Philippines remains one of the fastest-growing economies in Asia today, faster than China, Vietnam, Indonesia and Malaysia. With a 7% GDP growth in the first three quarters, we are sure to achieve, if not surpass, our target of 6-7% growth for the whole of 2016,” said Socioeconomic Planning Secretary Ernesto M. Pernia in his keynote speech in a year-end press conference. “For this year, 6.5-7% pero palagay ko… closer to 7% than 6.5%,” Mr. Pernia added, explaining that gross domestic product ( GDP) should grow 7.2-7.3% this quarter if the top end of the full-year target is to be breached.

Budget Secretary Benjamin E. Diokno had said on the sidelines of a Nov. 26 Business World forum that he expected fourth-quarter GDP growth of 6.9-7%.

Yesterday also saw the World Bank raising its own 2016 and 2017 growth forecasts for the Philippines, right on the heels of the Asian Development Bank’s (ADB) Dec. 5 upward adjustment.

After ADB raised its 2016 forecast for the Philippines to 6.8% from a 6.4% projection pitched in September and 6.0% in March, the World Bank yesterday said it was upgrading its own outlook for the country: also to 6.8% from the 6.4% it gave in October, and to 6.9% from 6.2% previously in 2017.

The World Bank expects Philippine GDP to expand by 7.0% in 2018, against the government’s own 7-8% target for that year.

Both multilateral lenders made the adjustments after the Philippine economy posted a three-year-high 7.1% expansion last quarter that enabled it to beat China and most other comparable major Asian economies, making it second only to India, which grew 7.3% in those three months. It was the second straight quarter that the Philippines played second fiddle to India in terms of economic growth.

“Recent economic trends illustrate the high confidence among investors and consumers, and provide the foundation for a more optimistic outlook for the remainder of 2016 and 2017,” the World Bank’s lead economist for the Philippines, Birgit Hansl, said in a statement.

“The economy’s strong performance in October and November, and continued policy commitment to an increase in public infrastructure spending, are expected to carry the economy’s growth momentum over to 20172018.”

The World Bank said growth in capital investment “is projected to remain the Philippine economy’s primary growth engine.”

And despite an expected increase in interest rates next year — especially as the US Federal Reserve signaled after raising policy rates last Wednesday that it expected three more increases next year, up from just two it had foreseen last September — “monetary policy is expected to remain supportive of growth, resulting in continued expansion in credit.”

The World Bank also said it expected further increase in spending on public infrastructure — which the government has programmed to rise 13.79% to P860.7 billion equivalent to 5.4% of GDP in 2017 from P756.4 billion, or 5.1% of GDP, this year — “to lead to significant spillover effects into consumption growth next year.”

“Accompanied by robust credit growth to households and healthy remittances [ from Filipinos working abroad], this is expected to fuel [ household] consumption” that has historically contributed more than 60% to GDP, the multilateral lender said in its statement.

It added that a modest recovery in merchandise exports — signaled last September and October after contractions since April 2015 — should add some fuel to growth.

NEDA’s Mr. Pernia yesterday bared expectations similar to those of the World Bank.

He said a 6.5-7.5% GDP growth target next year will ride on a continued rise in public spending and household consumption, as well as a recovery in merchandise exports and agriculture, which grew strongly in JulySeptember after five straight quarters of contraction due to drought brought by El Niño.

“Public spending, exports are picking up, consumption is still strong… That’s on the demand side. On the supply side, agriculture is going [through an improvement] because of the rains. And manufacturing is also going [through an improvement],” Mr. Pernia said.

Sought for comment, Land Bank of the Philippines economist Guian Angelo S. Dumalagan said: “I think NEDA may be spot… towards the end of the year, I think we might probably see a recovery in our exports because if you look at the trade data of some of the major economies in the world — Japan, China — for some months in the last three quarters, they’re actually seeing better reports.”

Speaking separately by phone, Sergio R. Ortiz-Luis, Jr., honorary chairman of the Philippine Chamber of Commerce and Industry and president of the Philippine Exporters Confederation, Inc., cited improving foreign direct investments, especially from China.

“If things go right, next year it ( hitting the 6.5-7.5% GDP growth target) is easy.”