ECONOMIC expansion in 2016’s third quarter grew slower than initially reported, the government said a day before the release of the fourth-quarter and full-year gross domestic product (GDP) data.
The Philippine Statistics Authority (PSA) said yesterday that its latest estimate shows the country’s GDP — which measures the value of final goods and services produced in a country — expanded by seven percent in the third quarter of 2016, lower than the initial tally of 7.1%.
The downward revision was triggered by lower revised estimates for five sub-sectors, namely: mining and quarrying (-2.5% from -0.4%); trade and repair of motor vehicles, motorcycles, personal and household goods (6.1% from 6.5%); transport, storage and communication (4.7% from 4.9%); manufacturing (6.8% from 6.9%) and “other services” (6.9% from 7%).
At the same time, upward revisions were made for financial intermediation (8.5%, or faster than the initial estimate of 8.1%); and real estate, renting and business activities, (8.9%, up from 8.8%).
Agriculture and forestry also clocked faster growth of 4.3% against 4.2% initially.
The third-quarter 2016 revision came ahead of today’s release of the preliminary estimates for fourth-quarter and full-year 2016 GDP.
A BusinessWorld poll of 13 economists and analysts yielded a median estimate of 6.9% for both the fourth quarter and full year, or near the high end of the 6-7% target band of the government.
Earlier this month, Socioeconomic Planning Secretary Ernesto M. Pernia said fourth-quarter GDP likely expanded within a range of 6.8-7.1%, while the full year forecast is for growth of 6.5-7%.
The NEDA director-general’s full-year estimate compares to the seven percent estimate of the Economic and Social Commission for Asia and the Pacific, as well as the 6.8% projection shared by the Asian Development Bank, Organization for Economic Cooperation and Development and the World Bank.
‘WE SHOULD NOT WORRY’
In a briefing yesterday, Michael Gerard D. Enriquez, chief investments officer of Sun Life of Canada (Philippines), Inc., said the life insurer has raised its estimate for 2016 GDP growth to seven percent from the estimate of 5.9% it gave on June 15 last year.
Fourth-quarter economic expansion, he said, could have clocked 7.2%, mainly driven by an increase in industrial production
Growth this year could slow to 6.7% — though still higher than the 6% estimate he gave in June last year — due to the “absence of election spending” that had otherwise fueled first-half economic growth in 2016.
“How we see economy this year… we should not worry,” Mr. Enriquez said.
“And we think a lot of these short-term noise or uncertainty is something that we need to consider, but would not affect the Philippine growth story over a medium- to long-term basis,” he added in apparent reference to jitters caused by President Rodrigo R. Duterte’s harsh criticism of the United States, the European Union and the United Nations for their statements of concern on his bloody war on the narcotics trade that has killed thousands of suspects and a handful of innocents.
As for the threat newly seated US President Donald J. Trump poses the Philippines’ business process outsourcing (BPO) industry, Mr. Enriquez noted that members of the Information Technology and Business Process Association of the Philippines have been “doing something to expand their clientele… booking more European countries, Australian… and even seeing some Israeli companies coming on stream here Philippines…”
“What’s important is how the sector can move and attract other countries…”
Analysts of two global banks said separately yesterday that they expect the Philippines to remain an outperforming economy in Southeast Asia.
Chidu Narayanan, Asia economist at Standard Chartered Bank, said the Philippines will be the region’s fastest-growing economy this year, riding on “very strong” household consumption, services and upbeat construction on the back of a state infrastructure drive.
Mr. Narayanan expects GDP to have expanded by 6.9% in 2016 before clocking 6.7% this year, which if realized would fall within the government’s 6.5-7.5% growth goal for 2017. In 2018, the economy is expected to expand by 6.5%, a rate deemed still “robust”.
“Some challenges to growth come more externally than domestically. There are still headwinds, and the global environment has been a lot more uncertain,” Mr. Narayanan said in a media briefing at the Makati Shangri-la Hotel.
“Demand from the rest of the world has been quite lackluster in 2016.”
The bank analyst expects worker remittances to continue growing though at a slower pace, but sees revenues from BPO overtaking these inflows over the next few years.
Together, remittances and BPO sales should help put the current account in surplus despite a persistent trade deficit, Mr. Narayanan added.
NOT ENOUGH
ING Bank N.V. Manila Senior Economist Jose Mario I. Cuyegkeng said that the government must unlock big-ticket foreign investment pledges in order to push growth above seven percent this year, as fiscal spending alone will not be enough to spur growth to a higher plane particularly at a time of heightened volatility in global markets.
“Some say that government spending will be one of the pillars of growth for the economy… [but] it’s not enough to bring us to a level of 7-7.5% growth this year,” Mr. Cuyegkeng said in another briefing in Taguig City yesterday, pointing out a programmed 12% growth in state spending for the year.
“There has to be other sources of activity, that’s why I mentioned PPP (public-private partnership) projects and unlocking pledges from China and Japan is going to be critical especially towards end of this year and will spill over to 2018,” he added, referring to investment deals signed during President Rodrigo R. Duterte’s visit to these countries last year.
The ING Bank economist said a trend growth between 6-6.5% is expected over the medium term, but will depend on the implementation of infrastructure projects coupled with the outcome of the Finance department’s tax reform proposals currently being discussed by Congress.
POLICY STEADY
Standard Chartered also expects the Bangko Sentral ng Pilipinas (BSP) to have enough room to keep monetary policy settings unchanged throughout the rest of the year, saying that there is little risk that inflation will go beyond the 2-4% target band despite more rate increases expected in the United States this year.
“It won’t heat up the economy too much… Monetary conditions in the Philippines are loose enough to support credit growth and growth itself,” Mr. Narayanan said.
In particular, he expects inflation to clock three percent this year, lower than the central bank’s 3.3% estimate but falling within the 2-4% target band. This would pick up from 2016’s 1.8% average.
Both ING and StanChart economists expect the peso to depreciate this 2017, as they forecast the local unit to trade at roughly P50.50 as the dollar picks up strength.
ING’s Mr. Cuyegkeng said local political uncertainties likely drove a weaker peso last year, the impact of which may be reduced by placing “more emphasis” on economic reforms.
Also, the Philippines is unlikely to suffer from the US’ withdrawal from the Trans-Pacific Partnership, given that the country is not as dependent on goods exports as others in the region, Mr. Narayanan said.
26 January 2017
By Ranier Olson R. Reusora, Researcher
Melissa Luz T. Lopez, Senior Reporter
and Janine Marie D. Soliman, Reporter
