Philippine GDP outlook raised to 6-7%

Thursday, 12 July 2012 21:59 Cai U. Ordinario / Reporter

THE country’s improved economic prospects in the past few months have prompted the local think tank First Metro Investment Corp.-University of Asia and the Pacific (FMIC-UA&P) Market Research Center to upgrade its full-year economic forecast for the country to around 6 percent to 7 percent this year.

In a phone interview, UA&P Senior Economist Victor Abola said the higher forecast stems from expectations that consumer spending would remain robust for the rest of the year on the back of benign inflation. Earlier, the think tank estimated full-year growth at 5.5 percent.

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Full-year gross domestic product (GDP) growth, Abola said, would also be supported by higher public- and private-construction spending as well as some amount of election spending toward the end of the year, around November and December, in preparation for the 2013 local elections.

“With industrial-electricity sales growth zooming to a two-year high of 19.7 percent in May, and public spending up by 18.3 percent, and new jobs still over 1 million in April, the outlook for GDP hike in the second quarter looks even more promising than the first quarter. This, together with the rest of the outlook below, enables us to upgrade our full-year projection for GDP growth to 6 percent to 7 percent,” the report said.

Abola said strong full-year growth would also be supported by robust GDP numbers in the second quarter. He said the think tank estimates a growth of 6.5 percent to 7 percent in the April-June period, higher than the first quarter’s 6.4 percent.

The growth drivers in the second quarter, he said, includes higher infrastructure spending, the recovery of the manufacturing sector, higher consumption spending compared to the first quarter, and stronger exports.

Inflation in the April-June 2012 period averaged 2.9 percent, below the Central Bank’s 3-percent to 5-percent target this year. Exports in the April-May period, on the other hand, averaged 13.65 percent.

Abola noted that the business-process outsourcing and tourism sectors posted a 15-percent growth in the quarter. This means that the services sector, a major source of growth for the Philippine economy, would post stronger growth than in the first quarter.

“The upgraded outlook for 2012 second quarter GDP expansion is more remarkable, given the slowdown of the US economy and China, two main engines of world growth, and the lingering banking and debt crisis in the euro-zone focused on elections in Greece, which held the world in tenterhooks. The outcome was fairly positive. No Grexit followed by some concessions by Germany in favor of growth for beleaguered Spain and Italy, core countries in the euro zone,” the report stated.

Earlier, National Economic and Development Authority (Neda) Director General Arsenio Balisacan said that this year, he expects economic growth to be within the government’s 5-percent to 6-percent growth target. He said this target has already incorporated the impact of the crisis in Europe and any slowdown in China.