Expectations of strong Q4 2017 growth mount

Font Size

Improving foreign demand for Philippine goods should help drive overall economic growth. -- AFP

THE PHILIPPINES is expected to have clocked gross domestic product (GDP) growth in the fourth quarter of 2017 that put the full-year pace well within target, according to an assessment released yesterday.

“[The year] 2017 ended with a bang!” First Metro Investment Corp. (FMIC) and the University of Asia and the Pacific (UA&P) said in the December issue of their joint monthly report.

“With infrastructure spending soaring by 45% in November and exports still on the rise, our GDP growth forecast of 6.5-7% for the full-year 2017 appears a no-brainer,” The Market Call Capital Markets Research read.

“Accelerating infrastructure and capital outlays should catalyze faster GDP growth in Q4 and 2018.”

BusinessWorld’s poll late last week of 12 economists yielded a 6.7% estimate median for the fourth quarter that was shared by Moody’s Analytics, while Socioeconomic Planning Secretary Ernesto M. Pernia said in a mid-December yearend news briefing that he expected 2017’s last three months to have seen a pace faster than the 6.7% average of the first three quarters.

Mr. Pernia told reporters yesterday that he was “happy enough” with fourth-quarter and full-year 2017 GDP data scheduled to be released today.

The government has targeted a 6.5-7.5% GDP growth in 2017 and 7-8% annually starting this year, coming from 2016’s actual 6.9%.

FMIC and UA&P said a continued rebound in exports, higher remittances from Filipinos overseas, a low budget deficit and inflation that stayed within the central bank’s 2-4% target range provided “upward growth momentum into the fourth quarter.”

Looking ahead, Mr. Pernia told reporters that “2018… will be a bullish year because there will be a lot of projects breaking ground, so a lot of spending on projects.”

And “[w]ith the higher income for those earning below P250,000” as a result of the first of up to five planned tax reform packages — Republic Act No. 10963 or the Tax Reform for Acceleration and Inclusion Act (TRAIN) — that kicked in as the year began, “there will be a lot of welfare enhancement on their part.”

“The net effect is still positive for them,” the socioeconomic planning chief said, “and the heightened prices” from higher sales taxes on several items “will be temporary… it peters out over time.”

For FMIC and UA&P, inflation “may pick up pace in the first few months of 2018 amid tax reform, but should remain within the BSP target, albeit at higher end.”

“Global recovery — especially in the US, EU and China — should provide a needed boost to exports, to fuel the economy’s second engine to drive 2018 GDP growth to 7-7.5%.”

Given this macroeconomic backdrop, FMIC and UA&P expect the central bank “to respond with two rate hikes” this year after keeping monetary policy steady since an increase in policy rates in September 2014, in order “to limit inflationary expectations from exceeding its target as the TRAIN’s indirect taxes come into effect.”

Monday also saw the International Monetary Fund (IMF) — which in October last year penciled 6.6% GDP growth for the Philippines in 2017 and 6.7% in 2018 — slightly adjusting upward by 0.1 of a point from October to 5.3% its projection for 2018 GDP growth for the five major Southeast Asian states Indonesia, Malaysia, the Philippines, Thailand and Vietnam, while keeping its 2019 forecast at also 5.3%.

It also hiked its world output projections for 2018 and for 2019 by 0.2 of a point to 3.9%.

“As the year 2018 begins, the world economy is gathering speed,” Maurice Obstfeld, IMF economic counsellor and director of Research, said in e-mailed remarks on the World Economic Outlook Update. “But political leaders and policy makers must stay mindful that the present economic momentum reflects a confluence of factors that is unlikely to last for long. The global financial crisis may seem firmly behind us, but without prompt action to address structural growth impediments, enhance inclusiveness of growth, and build policy buffers and resilience, the next downturn will come sooner and be harder to fight.”