Poll run-up to drive 6.4% growth — Metrobank
THE Philippine economy is expected to grow by 6.4% this year, as government spending is seen picking up ahead of the 2016 elections, the research arm of the Metropolitan Bank & Trust. Co. (Metrobank) said.
“Research sees 2015 to be a better year especially with spending for the 2016 elections expected to be kick-started in the second half of 2015. The government spending is seen to cause a rebound in investment spending. Full-year GDP ( gross domestic product) growth is seen to average around 6.4%,” Metrobank Research said in the “Economic Weather Report First Quarter 2015 Outlook and Forecasts” released on Wednesday.
The forecast, however, still falls short of the 7%-8% growth target set by government this year.
The industrial sector will still be a top performer amid solid expansions in manufacturing and construction, it said.
Risks to domestic economy remain, however, amid persistent port congestion issues, issues with the power supply, the uneven performance of the global economy, financial market volatility, among others.
The economy grew by 6.1% last year, a few points shy of the government’s 6.5%-7.5% target for 2014 after a five-quarter-high of 6.9% was seen in October-December. Crawling farm sector output and lower-than-programmed — and at times even contracting — state spending had weighed on growth for much of last year.
Meanwhile, inflation is expected to slip to 2.8% in 2015 from the 4.1% recorded last year “amid the softening of global commodity prices.”
“Expect low inflationary pressure this 2015 as stable food prices and soft oil prices remain,” Metrobank Research said, citing the high base from 2014. It added that possible upside risks may come from power costs given shortages in the Luzon grid, and a sudden reversal in oil price movements.
This year, the central bank expects inflation to settle within a lower band of 2%-4%, with an average forecast of 2.2%.
In 2014, the central bank raised key interest rates by a total of 50 basis points ( bps) to 4% and 6% for overnight borrowing and lending, respectively; special deposit account rates also rose by a total of 50 bps to 2.50%; and the bank reserve requirement were up by a total of two percentage points as strong liquidity growth and supply- side pressures had threatened to push inflation beyond the upper end of the target.
These policy adjustments helped cool inflation down to 4.1% in 2014, well within the Bangko Sentral ng Pilipinas’ 3%5% target for that year. —