Quantcast
Latest Stories

GDP expansion seen to decelerate on infrastructure constraints

By

The Philippine economy can expand at a faster pace of 7.2 percent this year but growth will likely decelerate over time as the slow buildup of infrastructure constrains foreign direct investment (FDI) flows, according to New York-based think tank Global Source.

In an Aug. 8 research titled “In a Good Place” written by Filipino economists Romeo Bernardo and Marie-Christine Tang, Global Source said that despite emerging risks from recent external events, the Philippines was expected to avoid the downshifting in emerging markets and instead grow above historical trend this year and next.

“This is mainly because the country has been relying on local growth drivers and its good macro position—low inflation, ample fiscal space, healthy external accounts, stable political environment—provides room for maintaining current policy settings,” the research said.

Global Source’s 7.2-percent gross domestic product (GDP) forecast for the Philippines this year is higher than the latest consensus forecast of 6.7 percent. Over the last decade, the country’s trend growth rate was 4.9 percent.

For 2014, the think tank expects growth to ease to 6.2 percent, although still a bit better than the 6-percent consensus forecast.

But despite being encouraged by the high optimism at present, Global Source said that other than real estate, which is estimated to be in its seven-year mid-cycle, private investments—particularly foreign direct investments (FDIs)—would “realistically be more modest than what the government is hoping for.” As such, it does not expect the economy to sustain a quarterly growth rate of above 7 percent beyond the second quarter of 2013.

For this year and in 2014, Global Source’s base case scenario is that investments, particularly public construction, will help boost the traditional consumption-led growth. The outlook for this year also factors in some recovery in electronics shipments in the second semester based on reports of depleted inventories of these export products.

One-off gains

“But with the disappearance of one-offs from election spending, growth is seen to fall below 7 percent by the second half of 2013,” the research said.

As to whether the Philippines can keep its above-trend growth rate considering trade and financial links, the report said there were the “niggling signs of vulnerability.” It noted the decline in approved building/construction permits in the first quarter, sluggish imports of capital goods and raw materials, slack in growth of non-electronics exports and the drop in vehicle sales growth to a low single-digit in June. And despite smaller declines in electronics export sales amid reports of exhausted chip inventories that signal sales recovery ahead, the report said analysts were wary about the knock-on effects of China’s weak export performance.

As such, Global Source said a quarterly growth of above 7 percent might  be difficult beyond the second quarter especially with the disappearance of one-time gains from election spending and stock market volatility paring wealth gains. Nevertheless, it remains optimistic of the country’s near-term prospects.

On FDIs, the think tank said that while investors were trooping into town and the high registration numbers recorded in the country’s economic zones since 2010 revealed genuine intent to set up shops locally, these plans would take time to complete. As such, actual inflows as reflected in FDI numbers have yet to impress, it said.

“Moreover, we are told that officials and business park locators are starting to look into possible problems associated with the industrial      zones’ absorptive capacity, not only in terms of space limitations but also congestion due to inadequate supporting infrastructure,” the research said.

Energy crunch

Global Source cited a warning from the energy secretary that if growth stayed on its current path, the Luzon grid would face supply tightness by 2015 particularly in the summer months when demand would peak.

Meanwhile, infrastructure public-private partnership (PPP) projects continued to face delays as the research cited the President’s failure in his latest State of the Nation Address (Sona) to signal more urgency in moving approvals ahead. The research said “a recent controversy alleging corruption in rail vehicles procurement may further slow transportation-related approval processes down while the public bashing by the agency-in-charge of a successful 15-year internationally recognized water PPP in Metro Manila, which is the subject of a statement of concern issued jointly by four national business organizations, may heighten perceptions of regulatory risk in these long-term contracts.”

With investors expected to increasingly fret about the outcome of the 2016 presidential elections, Global Source said economic growth beyond Aquino’s term would depend on the government’s ability to “crystallize a convincing follow-on story in support of the investment grade rating that investors can anchor their decisions on.”


Follow Us


Follow us on Facebook Follow on Twitter Follow on Twitter


Recent Stories:

Complete stories on our Digital Edition newsstand for tablets, netbooks and mobile phones; 14-issue free trial. About to step out? Get breaking alerts on your mobile.phone. Text ON INQ BREAKING to 4467, for Globe, Smart and Sun subscribers in the Philippines.

Tags: Business , Foreign Direct Investment , GDP , Global Source , Philippine economy

  • mekeni62

    election period over. election spending over. uphill trend over. now back to reality. feel the ampaw economic growth.

  • Gerald Abueva

    Tang ina itong si Noynoy, lolokohin na naman tayo. Kupal talaga itong magpamilyang tiwali. Tang ina mo Noynoy!

    • Handiong

      Malaki bang nawalang corruption sa iyo nang manalong Presidente si PNoy?

  • Manong Johnny

    GDP during Election Years:

    1986-Q1 = -0.1%. . . . 1995-Q1 = 4.8% . . . . 2007-Q1 = 6.3%
    1986-Q1 = 2.8% . . . . 1995-Q2 = 4.3% . . . . 2007-Q2 = 7.6%
    1987-Q1 = 3.1% . . . . 1998-Q1 = 1.8% . . . . 2010-Q1 = 8.4%
    1987-Q2 = 3.6% . . . . 1998-Q2 = -0.8%. . . . 2010-Q2 = 8.9%
    1988-Q1 = 6.0% . . . . 2001-Q1 = 2.5% . . . . 2013-Q1 = 7.8%
    1988-Q2 = 2.4% . . . . 2001-Q2 = 3.0% . . . . 2013-Q2 = 7.5%
    1992-Q1 = 2.2% . . . . 2004-Q1 = 7.3%
    1992-Q2 = -0.3%. . . . 2004-Q2 = 7.7%
    (NSCB data, based on contant prices, adjusted for inflation)

    Is the GDP expanding? Nothing could be further from the truth. For an election year like 2013, the Q2 GDP is dishearteningly lower than Q1. Despite the wasteful pork barrel and massive election spending stimulus of PNoy leading up to the May election, the Q2 GDP still managed to slide down. Looking at past data, such disappointment in the economy has never happened during GMA’s time. With the possible tapering off of US Fed’s QE later in the year and other global headwinds, it is highly doubtful if developing economies like PHL will see a strong second half. In fairness to NEDA Chief Jun Balisacan, he did come out a week ago to warn the public about a “robust” Q2 GDP, but not something to crow about. PNoy has a knack for making things worse and getting things wrong, to say the least. Like mother like son.

  • upupperclassman

    Another article to prepare us mentally that economic growth is tapering and slowing down.



Copyright © 2014, .
To subscribe to the Philippine Daily Inquirer newspaper in the Philippines, call +63 2 896-6000 for Metro Manila and Metro Cebu or email your subscription request here.
Factual errors? Contact the Philippine Daily Inquirer's day desk. Believe this article violates journalistic ethics? Contact the Inquirer's Reader's Advocate. Or write The Readers' Advocate:
c/o Philippine Daily Inquirer Chino Roces Avenue corner Yague and Mascardo Streets, Makati City, Metro Manila, Philippines Or fax nos. +63 2 8974793 to 94
Advertisement
Advertisement

News

  • 2 killed in apparent Bahrain car bombing
  • SC suspends proctor in 2011 bar exams
  • At barricades, Ukraine insurgents await Easter
  • Solons seek ample protection for bank depositors
  • Tragedies at sea: The Sewol and the Costa Concordia
  • Sports

  • Tottenham beats Fulham 3-1 in Premier League
  • Martino defends Messi, takes blame for Barca fail
  • Vettel hoping for resurgence at Chinese GP
  • MLB pitcher donates $100,000 for Sewol ferry victims
  • Hamilton takes pole at Chinese Grand Prix
  • Lifestyle

  • Levine designs womenswear with help from fiancee
  • Gabriel Garcia Marquez, Nobel laureate, dies at 87
  • Ford Mustang turns 50 atop Empire State Building
  • Pro visual artists, lensmen to judge Pagcor’s photo contest
  • ‘Labahita a la bacalao’
  • Entertainment

  • Myx TV premieres Asian American ‘docu-series’
  • A nutty finale for ‘Scandal,’ TV’s craziest show
  • EXO postpones release of mini album ‘Overdose’
  • ‘X-men’ filmmaker slams ‘fabricated’ sex attack claims
  • Singer Chris Brown’s bodyguard on trial in DC
  • Business

  • Fiat-Chrysler to produce iconic Jeep in China from 2015
  • US commerce secretary spells out economic facet of ‘pivot to Asia’
  • Italy sells luxury state cars on eBay
  • Asian shares mostly up in quiet trade
  • Dollar up in Asia on US jobs data, Ukraine deal
  • Technology

  • Nasa’s moon-orbiting robot crashes down
  • Netizens pay respects to Gabriel Garcia Marquez
  • Nokia recalls 30,000 chargers for Lumia 2520 tablet
  • Facebook rolls out ‘nearby friends’ feature
  • Netizens seethe over Aquino’s ‘sacrifice’ message
  • Opinion

  • Editorial cartoon, April 17, 2014
  • A humbler Church
  • Deepest darkness
  • ‘Agnihotra’ for Earth’s health
  • It’s the Holy Week, time to think of others
  • Global Nation

  • Cesar Chavez movie sparks memories of Fil-Am labor leaders
  • Filipinos in US poised for success
  • Visas for priests and other faith leaders
  • DOH to continue tracking co-passengers of OFW infected with MERS virus
  • 5 Filipinos with MERS in UAE reported in stable condition
  • Marketplace