Confidence in gov’t key to private investment
A SURGE in public spending likely kept the Philippine economy growing above 6% during the third quarter, although its potential to draw in private investment will still depend on confidence in the Duterte administration, an economist from Natixis AP said.
Natixis economist Trinh D. Nguyen said gross domestic product (GDP) likely expanded by 6.6% during the July- September period, slower than the 7% recorded in the second quarter but still faster than the 6.1% logged in the year-earlier period as public investments pick up under the new government.
“We expect GDP in Q3 to grow by 6.6% year on year on higher fiscal spending and investment, and slightly decelerate on the previous quarter as election spending wears off. Based on high frequency data, public spending is expected to pick up in Q3 to catch up for sluggish spending in first half 2016,” Ms. Nguyen said in an e-mail interview.
If realized, the growth pace would again fall within the government’s 6-7% target for the year. This also compares to a 6.7% median estimate among 13 economists in a Business-World poll conducted last week.
The Philippine Statistics Authority will release official third quarter GDP data on Thursday.
The economy expanded by 7% in the second quarter, accelerating from the previous year’s 5.9% clip fueled mostly by investments and household consumption, with election- related spending for the May 9 polls providing a seasonal boost. A 6.8% climb was posted during the first quarter, which kept the first semester tally at 6.9%.
Socioeconomic Planning Secretary Ernesto M. Pernia has estimated third-quarter growth at between 6.3% and 7.3%, saying that increased infrastructure spending should have helped offset a continued export slump.
Government spending surged by 30% in September from a year earlier, reflecting a one- time payment of P20.475 billion to settle outstanding dues to the Philippine International Airport Terminals Co., Inc. over a botched project.
For the quarter, total disbursements grew 14.4% from a year earlier to P639.166 billion, outpacing a 5.1% rise in total revenue that amounted to P545.779 billion, according to preliminary Treasury data.
While government spending looks upbeat for the third quarter, Ms. Nguyen said enthusiasm among private businesses to invest more will depend on their level of comfort working with President Rodrigo R. Duterte and his team.
“In the medium term, much depends on whether President Duterte can instill confidence for domestic investors to take investment higher, as he had promised on higher fiscal investment,” the economist pointed out.
Businesses remained optimistic but grew less bullish about economic prospects for the third quarter, results of the central bank’s quarterly Business Expectations Survey showed, amid expectations of slower activity due to the rainy season, a change in spending priorities among households due to the school opening, and concerns over the mining sector, which saw the suspension of 30 mines last September.
Still, 45.4% of companies said they are positive about local conditions, albeit lower than the 48.7% confidence level posted during the second quarter. BSP Managing Director Francisco G. Dakila, Jr. said in August that the survey results remained “consistent with a strong outlook for the economy” up to the third quarter.
Investments posted the biggest increase during the second quarter at 27.2%, more than double the 12.7% pace seen a year earlier.