The country’s economic growth, measured in terms of gross domestic product (GDP), could still breach 7 percent this year, on the back of “massive” election spending in the second half and the rollout of public-private partnership (PPP) projects.
In its latest Market Call report, First Metro Investment Corp. and the University of Asia and the Pacific (UA&P) Capital Markets Research group said the sharp fall in fuel prices would also bolster consumption—one of the main drivers of Philippine GDP.
“Expected GDP gains remain strong, as household consumption is supported with lower levels of inflation, more employment and more election spending,” the report read.
“Inflation is likely to ease further, as food prices continue to fall or steady with the revival of supply chains, and as crude-oil prices remain depressed due to oversupply from the Organization of the Petroleum Exporting Countries and North America,” the report added.
The report noted that remittances from overseas Filipino workers (OFWs) will continue to remain strong and would boost consumption. Cash remittances, which were coursed through banks by OFWs, rose by 11.3 percent to $2.1 billion in March, the highest recorded in more than five years.
Remittances in January to March this year reached $5.8 billion, 5.5 percent higher than the level recorded in the first quarter of 2014. The report noted that the increase in OFW remittances in the first half of the year may settle at 5 percent.
The FMIC-UA&P Capital Market Research said the expected recovery in the country’s exports would also bolster GDP growth for the year. The research group said exports in the first quarter remained weak due to slowing production activities in Japan, China and the US.
“Exports will rebound in the second quarter as the harsh winter and delayed consumption response of the steep drop in crude-oil prices zapped performance in [Japan, China and the US] in the first quarter,” the report read.
“We expect recovery to gain traction for the rest of the year,” it added.
The economy grew by only 5.2 percent in the first quarter of 2015, the slowest since the last quarter of 2011, when the country’s GDP expanded 3.8 percent. The government admitted that this was largely due to its underspending. With the disappointing result in the first three months of the year, the economy must post an average of 7.5-percent growth in the second to fourth quarters to hit the government’s full-year target of 7 percent to 8 percent.
Earlier, global credit watcher Moody’s Investors Service said economic growth this year should prove slower than projected, on account of the government having failed to extend the liquidity boost that the private sector alone cannot provide.
In a credit assessment released on June 19, Moody’s scaled back its growth forecast by half a percentage point to 6 percent, from 6.5 percent originally. For 2016, Moody’s projects local output to be limited to only 6.5 percent.