Q1 PH GDP growth seen highest in Asean at 6.2%

by Ben O. de Vera, @BenArnolddeVera, Philippine Daily Inquirer, May 16th, 2016

THE ECONOMY likely expanded at a faster pace during the first quarter partly on the back of election spending, but the incoming administration must put clarity as far as its economic agenda was concerned to sustain robust growth for the rest of the year, economists said.

The research arm of debt watcher Moody’s expected the Philippine economy to have grown by 6.2 percent during the first quarter, which would make the country “the best-performing economy in Southeast Asia” during the period.

“Unlike its regional counterparts, the Philippine economy has overcome the negative effects from slowing global demand. Although the archipelago’s exports have been falling, private consumption and investment activity are expected to remain strong,” Moody’s Analytics said in a note to clients last Friday.

The government will announce the first-quarter gross domestic product (GDP) performance on Thursday.

GDP grew 5 percent in the first quarter of last year while full-year 2015 GDP growth settled at 5.8 percent.

Land Bank of the Philippines market economist Guian Angelo S. Dumalagan put GDP growth at 6.4 percent during the first three months as growth in services—which he noted was historically among the top beneficiaries of higher government and consumer spending during election time—offset weak exports and agricultural output.

This year, the government expects the economy to expand by 6.8-7.8 percent, but for Dumalagan, GDP growth could settle at 6.1 percent by yearend partly as “weather conditions may continue to weigh down on economic growth especially since El Niño might potentially be followed by a period of heavy rains.”

The change in administration might also temper growth prospects, Dumalagan said. “The change in presidency is a major risk factor as it could potentially result in a reversal or a slowdown in economic reforms. It may even lead to a cut in the country’s credit rating. The initial task of the next administration would be to gain the trust of investors by convincing them about the sustainability of the country’s development,” Dumalagan said.

Bank of the Philippine Islands economist Nicholas Antonio T. Mapa said they expected first-quarter economic growth within the range of 6.4 and 6.9 percent. “In previous election years, we note an acceleration in GDP as elections generally see increased economic activity as rallies are held, posters are printed and campaign shirts are distributed. This will see a boost to consumption, which is our main driver of growth, providing 70 percent of our GDP growth over the past decades,” he noted.

For Mapa, a smooth transition from the Aquino to the Duterte administrations would limit risks to the growth outlook. “Generally transitions can be cumbersome to growth and we hope the turnover of power from Aquino to Duterte will be a smooth one. In the past, we’ve seen a slowdown in growth in the second half of an election year, perhaps from external factors but an internal factor would be the learning curve that the incoming government would need to complete before getting into stride. Government spending may slow as new Cabinet officials go through a honeymoon period to learn the ropes of his or her new job function. If Duterte can accelerate this transition, however, the impact may be limited.”

For ANZ Research Asean and Pacific economist Eugenia Fabon Victorino, GDP likely grew a strong 7.6 percent in the first quarter following a boost from election-related spending.

For the entire 2016, Victorino sees GDP growth of 6.1 percent. “Without further clarity on the Cabinet to be formed by the President-elect, we cannot make an assessment on the economic momentum beyond 2016. However, we have been of the view that none of the candidates prior to the election had spoken of reversing any of the economic structural reforms that had been instituted over the last 15 years,” she said.

Standard Chartered Bank economist Jeff Ng said they expect first-quarter GDP expansion of 6.2 percent. “The second-round effects of government spending may also have boosted investment and household consumption. Three factors are likely to cushion external headwinds from goods exports this year: services exports, domestic growth, and room for fiscal support. Household consumption will likely be supported by solid labor-market fundamentals and elections-related spending,” Ng explained.

Ateneo de Manila University economics professor Alvin Ang said their first-quarter GDP growth forecast ranged between 6.1 percent and 6.4 percent, taking into consideration a decline in agricultural performance during the first three months.

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