Q1 gains likely carried over to Q2 lead indicators point to sustained growth – NEDA

MANILA, Philippines – The Philippine economy is expected to sustain the gains from the previous quarter on the back of strong government spending and election-related consumption, the National Economic and Development Authority (NEDA) said yesterday.

Economic Planning Secretary and NEDA director general Emmanuel Esguerra said while more indicators are needed to get a clear picture of economic growth in the first quarter, recent indicators point to sustained growth in the present quarter.

“We still need to see some other numbers to get a better assessment, but I think, yes (growth can be sustained),” he told reporters on the sidelines of a book launch at the Development Bank of the Philippines in Makati.

He attributed this to indicators that have come up earlier, as well as increased government spending and election-related consumption.

The Philippine economy grew at its fastest pace of 6.3 percent in the last quarter of 2015, resulting in a full-year growth of 5.8 percent.

Manufacturing registered strong growth in January, led by expansion in the production of chemicals, food products and other manufactures.

Factory output, as measured by the Volume of Production Index (VoPI), grew at a significantly faster pace of 34.3 percent in January from a growth rate of 2.6 percent in the same period last year. The Value of Production Index (VaPI) also rose at a significantly faster pace of 26.5 percent in January from a 1.1 percent contraction in the same month last year.

NEDA said businesses are optimistic because of the traditional election-related spending and roll-out of infrastructure projects under the public-private partnership scheme.

Exports, however, fell 3.9 percent in January, extending its decline for the 10th consecutive month on lower earnings across major commodity groups. Philippine exports have been on the decline since April 2015.

NEDA attributed this to sluggish growth in the global economy, hence the need to maximize trade opportunities offered by economic groupings and trade agreements.

The government has also been stepping up its spending as reflected in the budgetary gap of P121.7 billion reported for 2015, which was up from P73.1 billion a year ago.

There were also fewer unemployed Filipinos in January as more work opportunities opened up in the industry and service sectors.

In its January Labor Force Survey, the Philippine Statistics Authority reported a decrease in unemployment rate to 5.8 percent in January from 6.6 percent in the same period last year.

The Bangko Sentral ng Pilipinas signaled yesterday it will keep interest rates steady on its meeting next week as the US Federal Reserve held rates steady to encourage the flow of funds amid global economic uncertainties.

The central bank thus believes there is a greater need for the Philippines to rely more on domestic drivers of growth.

For the Philippines, global economic events that directly impact its economy include the economic slowdown in China and Japan – both of which are major sources of capital goods and are export destinations of Philippine agriculture and manufactured products.

The negative effect of falling prices on Gulf economies impact the inflow of remittances from Filipino workers in this region. –Czeriza Valencia (The Philippine Star)