WEAK consumer demand in the United States will likely keep the country’s export-earnings growth in single digit in the first quarter of 2015, according to First Metro Investment Corp. (FMIC) and University of Asia and the Pacific (UA&P) Capital Markets Research.
The country’s export-earnings growth already started 2015 with a contraction of 0.5 percent in January. However, this was an improvement from the contraction of 3.2 percent in December 2014 and contraction of 3 percent in January 2014.
FMIC and UA&P Capital Markets Research said this was due to a decrease in the outbound shipments of five of 10 major commodities, such as other manufactures, woodcrafts and furniture, chemicals, metal components and coconut oil.
“Exports may temper in Q1 [first quarter] to a single-digit pace as consumer confidence in the US has been very volatile. China’s growth has also eased, while sluggishness in the euro zone persisted with the unresolved Greece debt problem,” FMIC and UA&P Capital Markets Research said.
However, the think tank said they expect that the recovery of the US economy, stabilization of China’s economic growth, and the quantitative easing in Europe and Japan will be able to spur demand for Philippine exports.
Overall, the group remains confident that the Philippine economy will attain the low-end of the government’s 7 percent to 8 percent gross domestic product (GDP) growth target this year.
In January FMIC and UA&P Capital Markets Research said the Philippine economy will likely register a GDP growth of between 7 percent and 7.5 percent this year.
The optimism of the think tank stems from the strong consumption spending by Filipinos on account of low inflation. In the first quarter, FMIC and UA&P Capital Markets Research expect inflation to average 2.5 percent.
The group’s inflation estimate for the January to March 2015 period is below its full-year average expectation of 2.7 percent on account of low crude prices.
Apart from low inflation, other factors that could contribute to higher GDP growth this year include higher government spending and higher export growth in the coming months.
“Two other factors will determine if the Philippine economy hits a 7-percent GDP growth rate in Q1: [a] Stronger infrastructure and government spending, for which there is little obstacle lurking, and [b] More robust expansion in exports than that exhibited in December 2014 and January 2015,” the think tank said.
The growth projections of the think tank are contained in the latest edition of Market Call, the group’s monthly publication on economic trends.
The publication is a result of an in-depth analysis on the emerging and leading trends in the global and local markets that have shaped the direction of the Philippine capital markets in the last four weeks.