First-quarter growth seen at least 6.5%
THE ECONOMY likely expanded by at least 6.5% this quarter, broadly within the government’s growth goal for the year, on upbeat exports and construction activity, analysts at First Metro Investments Corp. (FMIC) and the University of Asia and the Pacific (UA&P) said in their joint report for this month.
“With bloated domestic demand and exports gaining lost ground, Q1 performance should again signal much vigor in the economy,” according to the March issue of The Market Call released yesterday.
“Q1 GDP should increase by at least 6.5% with manufacturing and NG ( national government) spending on a roll.”
If realized, the growth pace — which the government is scheduled to report on May 18 — moderates from a 6.6% reading in the fourth quarter of 2016 and the 6.8% pace clocked in in the comparable January- March period last year.
That would also start the year well within the government’s 6.5-7.5% growth goal but below FMIC’s 7-7.5% forecast for the full year.
Citing preliminary data from the Philippine Statistics Authority (PSA), FMIC and UA&P economists believe strong investment growth and a manufacturing surge will continue to propel the economy forward, opening up more jobs for Filipinos and unlocking higher consumer spending this quarter.
Philippine factories churned out 9.3% more in volume of goods in January from a year ago, initial PSA data showed, while merchandise exports surged 22.5% to $5.13 billion, recovering from January 2016’s 3.9% drop. The Market Call also noted that manufacturing grew 23% in January alone, “fueled by higher investments”.
The national government likewise reported stronger spending last year, spurring the budget deficit to an equivalent of 2.4% of gross domestic product (GDP), the widest in six years as the newly installed Duterte administration vowed to crank up state spending.
The analysts also cited record foreign direct investment net inflows at $ 7.93 billion in 2016, coupled with the sustained pickup in imports of capital goods which rose by 9.1% in January, as among the components that “signal sturdy output expansion” this quarter.
On the other hand, the higher inflation rate seen in the first two months of the year is unlikely to be a concern, with the rate seen to stabilize at above three percent over the near term. Prices of widely used goods and services climbed by 3.3% in February — the highest in over two years — bringing the year-to-date pace to three percent, at the mid point of the central bank’s 2-4% target band for the entire 2017.
FMIC expects monthly inflation to hold steady at 3.5% for March until May, while the peso exchange rate is seen to weaken beyond P50 to a dollar all throughout the first semester.
The local unit has been trading weaker than the P50 level since Feb. 17, reflecting market uncertainty at that time ahead of a looming rate hike from the United States. The Federal Reserve proceeded with a 25-basis-point increase in its March 14-15 meeting, while baring hints that two more hikes may be introduced within the year.
Economists expect the Bangko Sentral ng Pilipinas ( BSP) to maintain current policy settings when its Monetary Board meets today, until after a second Fed rate hike by June. BSP Governor Amando M. Tetangco, Jr. has said that the central bank does not need to move in sync with the Fed, as Philippine monetary policy still remains supportive of the domestic economy.
The government’s infrastructure push is also seen to boost overall growth prospects.
“As major PPP (public-private partnership) projects have commenced work and governmentfunded infrastructure spending rides high, the boost in construction activity should show consolidation of economic strength,” the report said.
The Budget department plans to spend as much as P847.2 billion on public infrastructure this year, equivalent to 5.3% of GDP.
President Rodrigo R. Duterte has committed to raising the share of infrastructure to seven percent of the local economy by 2022 to address the country’s rising needs while also spurring further GDP growth. —