Full year PH growth seen at 5.7% to 6%

The Philippine economy may have a full-year growth of 5.7 percent to 6 percent if domestic demand, remittances and exports will further increase in the remaining months of the year, according to the latest issue of The Market Call.

In the October issue of The Market Call, Metro Pacific Investment Corp. (FMIC) and the University of Asia and the Pacific (UA&P) Capital Markets Research stated that September to December of this year should be very good months for the Philippine economy.

The think tank said that the remaining months of 2012 will be driven by solid domestic demand, especially with the national government having much fire power to spend for the rest of the year, and overseas Filipino workers (OFW) remittances remaining robust.

“While gains in net new jobs were widely off-target, Meralco [Manila Electric Co.] electricity sales were flat, and headline inflation shot up to an unexpected 3.8 percent in August, the positive news on the Philippine economy in September appeared to have taken the upper hand,” it added.

FMIC and the UA&P Capital Markets Research also said that the cue for this sanguine view is summarized by the positive performance of the bond and stock markets in September, fiscal surplus in August, July exports up by 7.8 percent, OFW remittances robust growth of 5.4 percent in July, and the Bangko Sentral ng Pilipinas putting policy rates on hold, with an option for further easing.

Outlook

“While part of the economic data for the ‘ghost month’ of August rang a negative tune, the outlook for Q4 [fourth quarter] is chiming a more cheery note,” the think tank added.

It projected inflation will average 3.4 percent in the third quarter of the year and 3.5 percent in the fourth quarter.

“Early signs of a reversal of the gains in consumer prices in August suggest that the underlying low inflation trend remains intact, also considering that crude oil prices have eased from its recovery in July-August,” FMIC and the UA&P Capital Markets Research added.

The think tank also asserted that extra strong infrastructure and capital outlays are in store for the rest of the year, as the fiscal deficit until August was just P71.2 billion, or only a fourth of the full-year target of P279 billion.

“This would leave much room for NG to keep up or even hasten the pace of spending for the rest of the year and provide a much needed stimulus in the face of uncertainties abroad,” it added.

FMIC and the UA&P Capital Markets Research also commented that election spending, both public and private, will start in October 2012 when candidates are supposed to file their candidacies with the Commission on Elections.

Meanwhile, the deficit for the rest of 2012 is not expected to exceed an average of P40 billion a month, and so the full-year deficit will be about P215 billion to P230 billion, the think tank noted.

“This would mean a primary surplus of P90 [billion] to P105 billion or 0.8-[percent] to 0.9-percent of GDP [gross domestic product],” it added.

FMIC and the UA&P Capital Markets Research also expects that the debt ratio will fall to 48.6 percent to 48.8 percent, because of the combined lower interest rates and faster-than-expected economic growth, adding that the pressure of borrowings from the domestic money market will therefore be minimal.

Moreover, despite the unfavorable conditions in the world economy, the think tank said that exports should continue its above 5-percent growth run, as the country’s copper smelter goes back into full operations, and electronics exports somewhat improve in the fourth quarter with the boost from presidential election spending in the United States.

Remittances, on the other hand, is expected to grow by 5 percent to 6 percent in the fourth quarter of 2012 as OFW remittances remained positive despite dire predictions of official international agencies, it stated. –Mayvelin U. Caraballo, Manila Times