The national economy pulled off a “surprise” growth rate of 5 percent in the first quarter after the 3.7 gross domestic product (GDP) hike it posted for all of 2011, an investment firm and university think tank said Thursday in their monthly economic assessment.
“President Aquino and his financial team appear to have begun the year on a right footing… reversing what some quarters claimed as under spending. One month may not be a good barometer for future performance, but at least the NG (national government) is moving well in the right direction,” First Metro Investment Corp. and the University of Asia & the Pacific said in their Market Call.
The economy grew 4.9 percent in GDP terms during the first quarter of 2011.
The Market Call outlook on the economy rings a more positive tone than the forecast of other financial institutions.
Washington-based global development aid lender World Bank pegged it at 4.8 percent for the whole of 2012, while US banking giant Citigroup projected Philippine growth at 4.6 percent and Singapore’s DBS Bank Ltd. noted it would be 4.2 percent.
Cid Terosa, senior economist at UA&P, also eyed the first quarter results with a grain of skepticism, saying it would be 4.5 percent to 5 percent.
“I expect a better first quarter growth this year compared to last year,” Terosa told GMA News Online Thursday. “However, one big factor is… lower level of investments as compared with the past.”
Sluggish investments in Europe and uncertainty in the United States, coupled with rising world crude oil prices are keeping investor sentiment on the side of caution, according to the UA&P economist.
“Although exports are slowly growing, the export performance could be better still,” Terosa added.
“Economic data made available in Q1 would indicate a much improved economy, which leads us to forecast a gross domestic product (GDP) growth of 5 percent or more for the quarter,” FMIC and UA&P also said.
Aside from the increased government spending as evidenced by the P15.9-billion fiscal deficit, the Market Call cited as basis for its growth estimate other economic indicators:
Meralco electricity sales (a proxy for economic activity) rose by an average of 8.3 percent in the first two months
‘First positive growth figure’
FMIC and UA&P noted the slight recovery of exports is the “first positive growth figure after eight months of negatives.”
Based on survey results of pollster Pulse Asia, the economic growth, however, is apparently not felt by a significant chunk of the Filipino masses–the target of the Aquino administration’s “inclusive growth” strategies embodied in the Philippine Development Plan 2011-2016.
In survey results released on Tuesday, Pulse Asia revealed that the administration got a disapproval rating of 40 percent from respondents interviewed from February 26 to March 9.
Respondents also gave the administration disapproval ratings of 30 percent on poverty reduction, 25 percent on improving workers’ pay, 21 percent on jobs creation.
President Aquino and his team got approval ratings of 41 percent on jobs creation and 40 percent on improving workers’ pay.
Contrary to public perceptions on inflation, the Bangko Sentral ng Pilipinas (BSP) and National Statistics Office (NSO) pointed out that inflation has been at single digit for many months now.
From 5.2 percent in October last year, inflation fell to 2.6 in March, the National Statistics Office said on its website.
With latest baseline forecasts showing inflation likely settling “near the lower half of the 3- to 5-percent target range” this year and next, the policy-setting Monetary Board of the BSP opted to keep the overnight borrowing rate at 4 percent and overnight lending rate at 6 percent.
Tetangco said the decision to keep BSP policy rates steady is a “prudent pause” to enable economic policymakers “to better assess how the upside and downside risks to inflation will play out.”
He also said the effects of the half-a-percent or 50-basis-point cut in policy rates early this year “continues to work (their) way through the economy.”
A reduction in interest rates holds various lag effects, and low interest rates make credit more affordable and foster increased loan demand.
Interest rate cuts also make shares of stock, bonds and other securities more attractive as investment options.
Less costly loans also enable merchants and producers to keep their selling prices steady.
The BSP chief said elevated world crude oil prices are the slightly upside risk to inflation and have potential “pass-through” impact on prices of goods and services.
“The BSP will continue to pay close attention to the outlook for inflation and growth to ensure that monetary policy settings remain consistent with price stability while being supportive of non-inflationary economic growth,” Tetangco assured.
Inflation is not likely to kick up much in Q2, as stable food prices offset much of the pressure of elevated fuel prices, according to the Market Call. —ELR/VS, GMA News
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