GDP growth seen to breach 7% in 2013

MANILA, Philippines – The Philippine economy is expected to grow over seven percent this year, eclipsing the high end of the government’s official 6-7 percent target.

In separate reports, New York-based think tank GlobalSource Partners and the Ayala-led Bank of the Philippine Islands (BPI) said gross domestic product (GDP) growth would hit 7.2 percent this year, coming off a strong 7.6-percent expansion in the first half.

In a market commentary, GlobalSource analysts Romeo L. Bernardo and Marie Christine Tang said they are keeping their full-year forecast of a 7.2 percent expansion, although they expect growth to settle below seven percent this quarter and the next.

GDP expanded 7.5 percent in the second quarter, matching China as the fastest-growing in Asia, sustaining the over seven percent pace for a fourth straight quarter.

GlobalSource said growth this year was primarily due to the mid-term elections in May which helped drive government and household spending for the first semester.

But aside from the election-related boost the economy got in the first half, Bernardo and Tang noted other downside risks to growth in the second semester such as the declining consumption growth.

The analysts pointed out that since consumption growth has been decelerating over the past four quarters, “it is hard to tell at this time if the peso depreciation’s boost to incomes from dollar remittances can reverse the trend.”

Another downside risk, Bernardo and Tang said, is the possible “more timid” government spending for the rest of the year amid the unfolding multi-billion peso pork barrel scandal.

A whistleblower has alleged lawmakers partnering with fake non-government organizations in order to divert pork barrel funds into their own pockets. Pork barrel refers to the government’s allocated funds for lawmakers meant to finance localized projects.

At the same time, Bernardo and Tang said “dampened investor confidence due to recent financial market developments” may drag economic growth in the second semester.

The Philippines, as well as other emerging markets in the region, are experiencing volatilities amid the impending tapering of the US Federal Reserve and the geopolitical risks in Syria.

Meanwhile, BPI has upgraded its full-year GDP growth forecast from the previous 6-6.5 percent range.

“Momentum seen in the first semester is likely to moderate in the second half 2013, especially as front-loading, or spending earlier during the year, is a common occurrence during election years,” it said in a report.

However, BPI pointed out that strong consumption growth would cushion the negative impact of recurring investor fears about ‘tapering’ and the escalation in volatility due to concerns about Indonesia’s burgeoning current account deficit.

“Consumer prices could also experience temporary upward pressure in the light of the recent geopolitical turmoil in Syria, which has driven oil prices higher by 6.18 percent (Brent crude) month-to-date,” BPI said.

The US Energy Information Administration forecasts that the global benchmark price of crude oil (Brent) will average $102 per barrel in the fourth quarter (currently at $114.36), reflecting the increasing supply of liquid fuels from non-OPEC countries. –Kathleen A. Martin and Ted P. Torres (The Philippine Star)