THE government is optimistic that the eco-nomy is still capable of expanding 6 percent for full-year 2015, with a “very achievable” 6.9-percent growth in the last quarter seen to cap the year.
Economic Planning Secretary Arsenio M. Balisacan made the bold assumption, following the 6-percent growth in the third quarter of the year that raised the average growth in the nine-month period to 5.6 percent.
“The fourth quarter will likely be driven by consumption growth because, first, the very low inflation, improving employment situation, the low oil prices, of course, it’s also the holiday season. Consumption growth speeds up in the fourth quarter. But this is more than just the holiday season. It’s also the eve of the national elections [which is also known to boost consumption spending],” said Balisacan, also the National Economic and Development Authority (Neda) director general.
However, other economists are not that optimistic. University of Asia and the Pacific School of Economics Dean Cid Terosa and University of the Philippines School of Economics Prof. Ernesto Pernia agree that the most the economy can grow is 6.5 percent in the October-to-December period.
This, Pernia said, will result in an average full-year growth of 5.8 percent.
“The volatile situation in the Middle East and Europe is a looming risk. Also, the expected drought can pull down growth rate,” Terosa said.
Pernia said other risks include the country’s weak exports to China and Europe, as well as the slowdown in remittances due to the strong dollar.
Ateneo de Manila University’s EagleWatch economist Alvin Ang said they also do not expect the fourth-quarter growth to reach 6.9 percent, as estimated by Balisacan.
Ang said they expect growth to reach 5.8 percent in the fourth quarter, and 6.9 percent was the high-end of their forecast. Ang added that a growth of 6.9 percent, however, was still achievable given
the circumstances.
“Our target was 5.8 percent, [and] 6.9 percent is on the high side for the fourth quarter, but achievable. Our fourth-quarter target is about 6.5 percent, bringing full-year growth to 6 percent to 6.2 percent. [We see the] same risks and drivers with the Neda. [The] only difference [is the] magnitude,” Ang explained.
Risks to the government’s outlook, particularly next year, include the prolonged dry spell and the impending change in administration.
Balisacan said that, while the farm sector has already suffered as a result of the prolonged dry spell, growth next year, particularly in the first semester, is expected to also be slow.
Balisacan also said the change in administration will likely affect investor confidence and, thus, be a risk to the country’s growth next year.
“Some risks still remain that may impede our growth potential. One is the still lingering effects of El Niño on the economy, especially for agriculture. The government has been taking measures to mitigate the impact, particularly on food security and potable water supply,” Balisacan said.
“Another risk would be the uncertainties that are naturally brought by an impending change of leadership with next year’s national elections. We need to remain focused on ensuring that the economy is on the right path as political changes take place,” he added.
Q3 performance
In the third quarter of 2015, the Philippine Statistics Authority reported that the economy posted a growth of 6 percent.
This was due to the robust growth of the services sector on the production side and increase in government spending on the expenditure side.
“The GDP turnout confirms that the economy doesn’t really need further monetery stimulus at the moment. But we are mindful of risks from natural disasters and global developments, including slower than expected growth among our trading partners. Further, inflation is seen to have bottomed last month. As such, we believe monetary settings continue to be appropriate for now. In addition to risks already mentioned, we monitor commodity price developments,” Bangko Sentral ng Pilipinas Governor Amando M. Tetangco said.
The services sector—which includes trade, financial and private services or business-process outsourcing—grew 7.3 percent in the third quarter of 2015.
This was the highest growth the sector recorded since the 7.4 percent it registered in the third quarter of 2013.
On the expenditure side, Government Final Consumption Expenditure posted the highest growth of 17.4 percent, followed by the export of services at 11.6 percent.
However, in terms contribution to GDP, Household Final Consumption still accounted for the largest chunk at 4.3 percentage points. “Strong domestic demand fueled output growth, led by significant improvements in government spending and household consumption,” Balisacan said.
“For the nine-month [period], the average government final consumption expenditure has already reached 7.2 percent, a lofty leap from last year’s contraction of 0.2 for the same period, and a 2014 full-year rate of 1.7 percent. This simply shows that the government is provingsuccessful in its efforts to overcome the spending bottlenecks that hampered growth in the first semester,” he explained.
Balisacan said the third-quarter data showed that the Philippines remained one of the fastest-growing major Asian economies. The country’s GDP growth was the third fastest after China’s 6.9 percent and Vietnam’s 6.8 percent. The third quarter data of the performance of India, another fast-growing Asian economy, was still unavailable at this time.
Malacañang said the growth for third quarter validated the thrust of reforms and proved that the economic fundamentals set by the Aquino administration are strong.
“From being the Sick Man of Asia, the Philippines is now seen as a key emerging economy, brimming with opportunities for Filipinos and foreign investors alike,” said Secretary Edwin Lacierda, the Palace spokesman.
According to Lacierda, President Aquino, from the beginning, “placed an emphasis not just on growth but also on inclusivity.This is why we have focused on meaningfully investing in our country’s greatest resource, the Filipino people, and also why we have sought to partner with our neighbors toward a more robust and resilient regional economy.”
With Butch Fernandez, Bianca Cuaresma