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Higher end of GDP target doable -- FMIC-UA&P

Posted on February 23, 2017

THE PHILIPPINE ECONOMY should be able to grow at least seven percent this quarter and for the entire year, riding on a sustained investment boom, as well as positive farm output and goods exports, analysts of First Metro Investment Corp. (FMIC) and the University of Asia & the Pacific (UA&P) said in their latest joint report.

A farmer prepares to plant rice seedlings on a paddy field in Sison town, northern Pangasinan province 03 August 2007. -- AFP Photo / Gabriel Malaya
“The Philippine economy should remain on track along a seven percent GDP (gross domestic product) growth path. The agricultural sector, and with it consumer spending, should rebound starting Q1-2017 and post modest growth for the year,” read The Market Call’s February issue.

A table in the report bared a 7-7.5% projection which, if realized, would match the high end of state economic managers’ own 6.5-7.5% target range for 2017.

The Philippine Development Plan 2017-2022 approved last Monday by the National Economic and Development Authority Board penciled 7-8% average annual growth for those years.

A recovery in farm output and exports should spur faster gross domestic product expansion, coming 2016’s 6.8% growth that landed near the top end of an official 6-7% target band.

“We think the easing of GDP growth [to 6.6% in the fourth quarter last year from the third quarter’s upwardly revised 7.0%] was a minor blip, caused by the agriculture’s negative record,” the report read.

“We see no signs of a letup in the upward momentum in capital goods imports, public construction spending, and manufacturing output to sustain domestic demand’s expansion pace,” it explained.

“With improved external demand, GDP growth in Q1 and for the rest of 2017 should hover around 7%, coupled with on-target moderate inflation.”

Farm output contracted by 1.11% in the fourth quarter after strong typhoons ravaged crop-rich regions, pulling full-year performance to a 1.41% decline.

Merchandise export sales dropped 5.2% as of end-November from 2015’s comparative 11 months, steeper than the three percent drop expected by the government for the full year.

The government now expects a two percent growth in total exports this year, alongside a 10% rise in imports.

“Given the solid gains of the US economy, and slight improvement in the Eurozone, we expect exports growth to become positive, albeit at a low single-digit pace in H1,” the analysts added.

In January’s World Economic Outlook update, the International Monetary Fund said it expects a recovery in world output, which in turn should help lift global demand for Philippine goods.

Back home, the economy will enjoy an upbeat domestic market.

“Investments spending will continue to drive the economic expansion as capital goods are expected to register double-digit gains for most of 2017. An important beneficiary has been the manufacturing sector which, together with another banner year for the construction industry, should propel industrial output growth to a pace of eight percent or better,” the economists added.

Factory output clocked a 23% increase in December, the fastest seen since a 35.8% hike in production volume in January 2016. That took 2016’s full-year manufacturing growth to 14.4%, faster than the 2.5% increase recorded in 2015, according to the Philippine Statistics Authority.

Inflation will likely log three percent for the whole year, higher than 2016’s 1.8% average but still within the central bank’s 2-4% target band. That, in turn, will give the Bangko Sentral ng Pilipinas room to pursue a rate hike next semester, even if rates in the United States are raised earlier.

Remittances -- a driver of household consumption -- should keep climbing as oil prices recover, benefiting those working in the Middle East. -- Melissa Luz T. Lopez