The Bank of the Philippine Islands (BPI) is convinced that the government can achieve this year’s target 7-percent to 8-percent local output growth, measured as the gross domestic product (GDP), on the basis of accelerated and higher government spending, low-inflation environment and cheaper oil.
BPI President and CEO Cezar Consing said coming from a low base, what some economists call an ambitious 7-percent to 8-percent GDP forecast is
feasible. “In many ways, it’s easier for us to achieve the 7-percent growth than other countries with much larger bases,” he told the BusinessMirror.
“If the government begins to spend again…with oil prices coming down, bringing inflation down, all of a sudden, the Bangko Sentral [ng Pilipinas] has much more flexibility as to when they want to do anything. That’s a good mix for growth,” he said.
Consing believes that with or without the election next year, the country can achieve faster growth this year.
“Whether it’s [2015] preelection year, even if they say there is no election next year, the combination of low oil prices, low inflation and an increase in government spending will produce good growth even absent the election next year,” he said.
Economists and various analysts have since found that, while the election process triggers a spending spree by many of those seeking elective positions, the liquidity that is added amounts to a mere fraction required for a more meaningful economic impact. “Even if there’s no election, the mix is good,” he reiterated.
According to Consing, ultimately, the banking business will benefit from this growth. “In the short term, the very low interest rates and the very flat yield curve can be a challenge for banks. In the short term it can be challenging, but in the long term growth will help banks,” he said.
Some of the analysts see that interest rates will gradually increase by the second half of the year, taking its cue from the US interest-rate hikes. Consing said, “I think the central bank has more flexibility now to delay [rate hikes] if they wanted to.”
Growth targeted to range from 6.5 percent up to 7.5 percent in 2014 has proven illusive during the year, as actual expansion in the first nine months averaged only 5.8 percent or way below the anticipated path and blamed on lackluster government spending, particularly on infrastructure.
But Budget Secretary Florencio B. Abad remained optimistic growth as high as 7 percent in 2014 is still possible based on unconfirmed public-sector disbursement in the final three months of last year.