The low-inflation environment and the increase in job generation are seen to boost the country’s growth beginning in the first quarter, according to First Metro Investment Corp.-University of Asia and the Pacific (FMIC-UA&P) Capital Markets Research.
In its latest Market Call report, FMIC-UA&P Capital Markets Research said it may even go below 2 percent by July 2015.
The latest job-generation estimate released by the Philippine Statistics Authority (PSA) in January, meanwhile, showed total employment increased to 37.5 million, from the 36.4 million recorded in January 2014.
“Strong job creation over the past year continues to overshadow other economic data as this would likely lead to higher consumption and investment spending. Manila Electric Co. (Meralco) electricity sales recovered from a two-month slump (December 2014 and January 2015), indicating that there is more zip in the economy than naysayers think,” the think tank said.
It is likely also more economic activity is occurring in the provinces, where local government units have even more fiscal space to take advantage of for the 2016 elections, it added.
“While exports continued to remain barely in negative territory and remittances rose by only 0.2 percent in January, these are likely to be temporary. Besides, the national government [NG] has fiscal space for heavy spending as its deficit for 2014 only hit 0.6 percent of GDP, pulling down its NG debt-to-GDP ratio further to 45.7 percent. This is now even lower than Malaysia [since 2012] and Thailand,” the think said in its latest Market Call.
The think thank, however, did not give actual growth estimates for the first quarter and full year.
“Economic data released in March provide notable support for having a positive outlook for Q1 [first quarter], with job generation hitting over 1 million [from a year ago] in the last four quarters, and inflation in February remaining muted at 2.5 percent,” the think tank said.
“A slight recovery in Meralco sales and expectations of higher government spending also boost expectations for another strong quarter performance,” it added.
The think tank expressed confidence that inflation this year will be within the central bank’s 2-percent to 4-percent target on the back of cheaper oil and stable food prices.
The report noted that the seasonally adjusted annual rate declined by 1.7 percent from 2.6 percent last month, indicating slower price movements net of seasonal factors.
With the low inflation, the think tank believes the central bank will likely maintain interest rates throughout 2015.
“Headline inflation rate will likely trek the downward path, with stable food prices and soft fuel prices in the horizon. It may even go below 2 percent by July if the current trends continue,” the think tank said.
In terms of job creation, FMIC-UA&P Capital Market Research said the increase of over 1 million new jobs will likely spur consumption and boost economic growth.
The think tank added that workers’ consumption across the board is expected to see an increase, not only because of low prices, but also due to the increase in minimum wage.
The report stated that starting April 15, Metro Manila workers in the nonagricultural sector will receive a minimum wage of P481, and P444 for those working in the agricultural sector. This is said to benefit 587,000 workers.
“Broad-based growth in all sectors signals a promising labor performance which the national government hopes to benefit the poor. The NG aims to reduce poverty by facilitating the creation of more and better quality jobs, and in effect higher incomes,” the think tank said.
In 2014 the Philippine economy posted a growth of 6.1 percent, the slowest since 2011 when the economy posted a full-year economic growth of 3.7 percent.
Basilican said the slower full-year economic growth was largely due to the lackluster economic performance in the first three quarters of the year. The country’s GDP growth in the first to third quarters was significantly affected by the government’s underspending.
However, a recovery in government spending in the last quarter of 2014 boosted growth in the fourth quarter to 6.9 percent, an estimate that was above market expectations.
The full-year economic growth in 2014 placed the Philippines as the second fastest-growing economy in Asia and the country’s fourth-quarter growth placed the country as the third fastest-growing economy in Asia during the period.
The national government will announce the country’s first-quarter GDP data on May 28, 2015.