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By Melissa Luz T. Lopez, Reporter

PHL economy still in ‘good shape’

Posted on February 26, 2016

THE PHILIPPINES remains in an economic “upswing” that can spur further growth on the back of sustained investor confidence, with room to push locally driven expansion still seen, a recent report by the Asianomics Group Ltd. said.

In a Feb. 15 report titled “Philippines: Cruise Control,” the Hong Kong-based research company said the country continues to have a strong growth momentum, with expansion seen to pick up pace further in 2016.

“Our Austrian stress analysis suggests that the Philippines is in relatively good shape and still in the upswing phase of the business cycle. This would support general expectations that economic growth will accelerate in 2016 from the 2015 level of 5.8% in real terms,” the group said, referring to a tenet under the Austrian economic school of thought, which focuses on credit cycles, profit cycles and cash flows.

The Philippines bagged a +3 total score from the research unit’s stress test scorecard among emerging and developed economies, the second highest after Taiwan. The rating is a point higher than the +2 bagged by the country in December after taking into account the faster-than-expected 6.3% growth seen in the fourth quarter of 2015 and improved real lending rates.

“The Philippines is still in an economic upswing with plenty of scope for acceleration,” the report said.

Asianomics chief economist Jim Walker said in an earlier interview that the Philippines can grow by as much as 6.5-7% in 2016, picking up from last year’s performance buoyed by sustained consumer demand and more investments for infrastructure.

“There are other signs of domestic economic health: internal tourism flows, low commercial property vacancy rates, consistently low consumer price inflation, fiscal deficit undershoots on the back of healthy tax receipts and strengthening investment spending,” the report read. These drivers are seen to make up for a slump in global commodity demand.

It also cited “success stories” from the business process outsourcing (BPO) sector and remittances from overseas Filipino workers (OFWs). This year, the group expects the BPO sector receipts to be at the same level with remittances at 17% of the gross domestic product (GDP), or bringing in $25 billion each in flows.

Money sent home by OFWs reached a record-high $25.767 billion in 2015, up by 4.6% from the adjusted $24.628 billion tally in 2014, according to central bank data.

The country’s external payments position is likewise in good shape, Asianomics added, given the country’s ample level of international reserves.

The group also described the quality of the expansion as “encouraging.”

“Suffice to say here that growth driven by investment is suggestive of an economy confident in its ability to expand business and make money. That is what leads to self-sustaining growth in any country,” the report read. “The Philippines is looking good in this respect and it is further manifested in the growing share of services in GDP.”

The economy “should easily manage” to expand by 6-6.5% this year, Asianomics added, if remittances are not heavily affected by record-low world oil prices and should the award and completion of projects under the public-private partnership scheme accelerate further. A supportive political environment beyond the Aquino administration will also help spur growth, it said.

“The big apprehension, however, is whether any of the candidates would continue or improve on the Aquino reforms or whether the Philippines will slip back into the kleptocracy-mode led by the two presidents immediately previous to Aquino -- Joseph Estrada and Gloria Macapagal-Arroyo,” the report read.

Analysts and international debt watchers have flagged reform continuity as the main concern ahead of the upcoming change in leadership, but the country’s economic managers have said that gains made under Pres. Benigno S.C. Aquino III’s term have already been institutionalized and hence, irreversible.

While weighing in on the profiles of four frontrunners for the May 9 presidential polls, Asianomics described the political landscape as still “volatile,” given fluctuating survey preference results and months ahead of the elections. “Continuation of Aquino’s reforms remains up in the air.”