By Imee Charlee C. Delavin, Reporter

2016 GDP top of range, but risks greater -- BPI

Posted on January 21, 2016

GROWTH in gross domestic product (GDP) could come in close to 6% in 2015, Bank of the Philippine Islands (BPI) said, and is poised to hit the high end of projections in 2016 due to improved public spending and a demand boost from the national elections.

BPI chief economist Emilio S. Neri, Jr., said the economy grew “close to 6%” in 2015 after a pickup in state spending, which offset weakness in exports.

“[GDP] could come close to 6... government spending was up... We were not spared these headwinds (in foreign trade). We’re experiencing it to a lesser extent but nevertheless they are a drag that’s diluting the improvement we’ve made,” Mr. Neri said at a media roundtable yesterday.

GDP grew 5.6% in the first nine months of 2015, prompting economic planners to manage expectations for 2015 closer to 6%. The official target range was 7%-8% after a 6.1% showing in 2014. The government is expected to report GDP data on Jan. 28.

State economic planners have conceded that to even hit a full-year average of 6% for 2015, the economy must have grown by at least 6.9% in the last three months -- a pace deemed “not difficult” by Budget Secretary Florencio B. Abad, who last week cited a sustained uptick in government spending in the second half.

In 2016, growth could approach the upper end of the 7%-8% goal, Mr. Neri added.

“[My] summary outlook for the economy is that it will be stronger because it’s election year but the risks are actually greater -- more risks because of the Middle East, China, devaluing yuan -- and then now, we have to also look at Britain which could possibly exit the European Union, that can drag on them and the rest of Europe, which is just starting to recover,” he added, noting that the bank is expecting China to devalue its currency by “at least 10% more” going forward.

Construction will remain strong this year and could make up for the slower growth in remittances, he added.

“We could get back on track to the upward projection, I think after at most three quarters. For sure the first six months will be adjustment period [for the new administration]... we really believe that the transition period will be a bit of a damper,” Mr. Neri said.

The momentum however “will continue” he noted, since most infrastructure projects are already in the pipeline.

“I think the number from NEDA (National Economic Development Authority) is P1.1 trillion [in infrastructure spending] for the next five years. Even if just a third of that or one-fourth takes place in the next two years, it will give enough momentum for construction activities,” he said.

Meanwhile, the peso is expected to fall to the P49-per-dollar level by end-2016, under current market conditions and “zero growth” in remittances next this year.

Should money sent home by Filipinos record significant declines, the peso will still be among the most resilient in the emerging markets.

“The peso is still among the top five most resilient [currencies] among emerging markets,” Mr. Neri said, adding that “weak currency does not mean weak economy” since a dip in the peso could support local industry.

Money sent home by Filipinos in the first 11 months of 2015 was $22.83 billion, 3.6% higher than a year earlier and closer to the central bank’s downwardly revised projection of $25.3 billion in total cash remittances for 2015.

In November, remittances grew 3.2% to $2.19 billion. Growth had been flat in October at $2.232 billion, sustaining the recovery from the 0.6% contraction seen in August.