By Daryll Edisonn D. Saclag, Reporter
THE PHILIPPINES could further eclipse its peers in the region this year and next as the economy is projected to grow faster than initially expected in both periods, Standard & Poor’s (S&P) said in a new report it released yesterday, citing the country’s strong domestic activity.
Bullish business sentiment, coupled with low inflation and higher government spending, likely prodded economic growth to 6.5-7% in the first quarter of 2015, First Metro Investment Corp. (FMIC) and the University of Asia and the Pacific (UA&P) said separately yesterday.
In a report, titled: “Slowing China The New Norm: Balancing Credit Stability And Continual Tailwinds,” S&P said Philippine gross domestic product (GDP) could grow by 6.2% in 2015 and 6.4% in 2016. Both estimates are slightly faster than the 6.1% and the 6.3% S&P had given in February for the respective years.
The forecasts, however, still fall short of the 7-8% growth target the government had set for both years.
Nevertheless, the global debt watcher expects the Philippines to continue to be the main growth engine in Southeast Asia, which is projected to grow at an average pace of 5.1% this year and 5.3% in 2016.
The report said the Philippines will “continue to see strong consumption and investment” this year and next.
Asked to elaborate, S&P economist Vincent R. Conti said in an e-mail: “We continue to expect the Philippine economy to expand by around 6% per annum over the next few years, driven by robust consumption and investment growth.”
“This strength in the domestic economy will be underpinned by the growing outsourcing sector and the rising middle class.”
Last year, economic growth came in at 6.1%, a few points shy of the government’s 6.5-7.5% target after a five-quarter-high of 6.9% was logged 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.
FMIC and the UA&P, in their March issue of The Market Call, said first-quarter GDP growth could have come in at 6.5-7%, faster than the downwardly revised 5.6% logged in the first three months of 2014 and compared to the 6.9% recorded in the final quarter of that same year.
FMIC and the UA&P said that the more-than-a-million new jobs created in the past four quarters “augur well for stronger consumption and investment spending.”
They also cited the country’s manageable inflation environment, which “should support the country’s growth.”
Headline inflation so far averaged 2.4% as of February after picking up to 2.5% that month from January’s 2.4%. The Bangko Sentral ng Pilipinas expects inflation to settle within 2-4% this year, with an average forecast of 2.2%.
In addition, the institutions cited two other factors that will allow the economy to hit the low end of the government’s 7-8% growth target: “stronger infrastructure and government spending” and “more robust expansion in exports.”
“We will keep a close watch on these data, but still maintain our view that GDP growth in Q1 will likely follow a 6.5-7% pace,” FMIC and the UA&P said.
