The British-owned Standard Chartered Bank said the country’s local output, measured as its gross domestic product (GDP), should remain robust and expand by at least 6 percent this year, supported in the main by an improving labor-market outlook.
The lender’s global research said the encouraging outlook for the country’s labor force supports expectations of strong private consumption activities over the coming years.
It said latest GDP and trade balance figures were “further evidence” of the Philippines’s strong domestic fundamentals. “We expect GDP growth to accelerate to 6.0 percent in 2015, and project a healthy current-account balance of 2.7 percent of GDP,” the bank said.
Its researchers quickly added that a lower unemployment rate and more full-time employment were developments likely to boost income and consumption.
Trend growth was seen to improve by 0.1 percentage point, if 1 percentage point of those not in the labor force enter full-time employment. A percentage point is one unit of 1 percent.
Private consumption accounts for 73 percent of the economy, and should cushion growth against volatile external factors.
“Private spending has so far centered on basic necessities such as food, housing and transport.
We see potential for increased spending on nonnecessities as employment prospects improve and incomes rise,” the lender reported.
The Philippines has abundant supply of labor. Measures to boost employment should boost trend growth. “We estimate that between now and 2020, the Philippines’s trend GDP growth rate will improve by 0.1 percentage point if 1 percentage point of the percentage of people currently not in the labor force obtain full-time employment.
“For every 1 percentage point reduction in unemployment and underemployment, the trend growth rate should improve by 0.07 percentage point and 0.03 percentage point, respectively, in the same period,” it said.
The country’s unemployment rate, at 6 percent, has been declining the past five years. The unemployment rate dropped 2 percentage points since the second quarter of 2010, as more people enter full-time employment.