Market consensus points to government hitting growth goal

Economic observers are confident that the Philippine economy will hit the target range of 6.5-percent to 7.5-percent growth this year after the government announced a 6.5-percent gross domestic product (GDP) expansion in the second quarter. 

ANZ Research said that, while the 6.5-percent domestic expansion “was only marginally stronger” than the 6.4 percent in the first semester, “the sequential momentum materially strengthened.”

“Despite the slowdown in private consumption growth, strong investment and the improvement in exports will remain supportive of growth,” ANZ Research said in a report.

Japanese financial firm Nomura also maintained its 6.7-percent growth forecast, citing better fiscal support and capital spending.

In its Global Markets Research report, Nomura said the 6.5-percent growth was in line with its forecast for the period, but beat the 6.4-percent market consensus.

Nomura said a 6.9-percent growth in the second half of 2017 was needed to achieve a 6.7-percent full-year output.

It expects the second half’s performance to be driven by “more fiscal support to growth, particularly from an increase in capital spending.

“More progress on infrastructure spending should also continue to crowd in private investment, while we expect household consumption to remain resilient,” Nomura said.

DBS Bank, in a research study, said it is also keeping its 6.4 percent growth forecast for the year as “inventory drawdown has continued, and this indicates the normalization in investment numbers is likely to remain a dominant theme ahead.”

“We are encouraged by the strong showing in both agriculture and manufacturing sectors. The manufacturing sector has continued to receive a boost from export demand, and this has proven to be a constant positive in recent years,” it added.

IHS Market Asia Pacific Chief Economist Rajiv Biswas, however, said he is maintaining a lower than target forecast growth of 6.4 percent this year and 6.3 percent in 2018.

“Over the next 12 months, the GDP growth outlook will be supported by significant increases in infrastructure spending, with total infrastructure spending of P1.13 trillion targeted for 2018, with transport and social infrastructure being key priorities,” Biswas said.

“Improving infrastructure is very important for boosting the nation’s industrial and export competitiveness, as the Philippines is competing for foreign direct investment with other ASEAN countries like Malaysia, Thailand and Singapore which have invested heavily in high quality infrastructure,” he added.

“However the rapid pace of growth of domestic demand has driven strong growth in imports, which has resulted in some deterioration of the current account, which is expected to record a small deficit in 2017. This has contributed to some depreciation of the peso, with a risk of further peso depreciation against the US dollar during the remainder of 2017,” Biswas said.

The economy grew 6.5 percent in the second quarter, which was lower than the 7.1 percent gross domestic product (GDP) expansion a year ago, but kept the Philippines among the best-performing economies in Asia.

Last quarter’s growth followed China’s 6.9-percent growth, but exceeded Vietnam’s 6.2 percent and Indonesia’s five percent growth rates during the period.

With the second quarter growth figure, the economy expanded more than six percent for eighth consecutive quarters, which analysts said showed economic resilience despite domestic and global challenges.

“We are well on track to meeting our full-year target growth of 6.5 to 7.5 percent,” Socioeconomic Planning Secretary Ernesto Pernia said.

The Philippine Statistics Authority (PSA) reported that industry recorded the fastest growth in the economy at 7.3 percent.

Net Primary Income from the rest of the world (NPI) grew by 8.6 percent compared with the 6.1 percent growth recorded in the same quarter a year ago that pushed Gross National Income (GNI), that includes overseas Filipino workers (OFW) remittances, to increase 6.8 percent Services slowed down to 6.1 percent in the period compared with an 8.2-percent growth during the second quarter of last year.

Agriculture recovered with a 6.3-percent growth from a two-percent decline in the previous year.

April to June quarter figure brought the gross domestic product (GDP) growth for the first semester to 6.4 percent.

“In addition to having improved expenditure management, government is moving towards reforming the tax system to make it simpler, fairer, more equitable, and also more internationally competitive,” Pernia said.

“Together with other measures, like the lifting of the quantitative restrictions on rice, we expect to increase the purchasing power of the majority of Filipinos, particularly those coming from the lower income groups,” he added.

Finance Secretary Carlos Dominguez III said the second quarter growth was “solid proof” that the government’s “unparalleled” investment strategy anchored on the ‘Build, Build, Build” program has started to “pick up steam,” and is on course to steering the Philippine economy towards a growth path of 6.5 to 7.5 percent for 2017.

Dominguez expressed the hope that the Senate would help the government meet this high growth target by passing soon enough—and in full—its own version of the comprehensive tax reform package, which would help spell the financial sustainability of its accelerated spending on infrastructure as well as on human capital formation and social protection for the poor and other vulnerable sectors.

“This is solid proof that the year-old Administration has been making the right moves at the right time in pursuit of President Duterte’s socioeconomic agenda on high—and inclusive—growth,” said Dominguez in response to the Philippines Statistics Authority (PSA)’sannouncement today (Aug. 17) that the GDP grew by 6.5 percent over the April-June 2017 period.

Public spending picks up

“With the upturn in state spending beginning in the year’s second quarter, President Duterte’s unparalleled investment strategy anchored on the ‘Build, Build, Build’ program has started to pick up steam,” said Dominguez, thereby raising hopes that the government could well meet its growth targets of 6.5 to 7.5 percent this 2017 and a higher 7 to 8 percent in 2018.

“We are optimistic that the accelerated state spending and project implementation would keep the Philippines in the club of Asia’s fastest-growing economies as it sustains the momentum for the government-set expansion rate of 6.5 to 7.5 percent this year and a higher 7 to 8 percent in 2018 and onwards,” he said.

RIZA LOZADA