Robust growth in 2014 seen
Two of the country’s largest finance firms expect the Philippine economy to grow north of 6 percent in 2014, aided by rehabilitation efforts in the wake of Supertyphoon “Yolanda.”
According to a research note of Metropolitan Bank and Trust Co., the local economic growth is likely to exceed 6 percent.
This jibes with the forecast of Banco de Oro Unibank—the country’s largest lender—which predicted that the economy would expand by 6.5 percent in 2014, slightly slower than last year’s pace, but sufficiently robust to cope with external shocks.
While financial markets have been adversely affected by the US Federal Reserve’s tapering of aggressive bond-buying operations that previously boosted global liquidity, the Philippine economy has remained resilient amid the uncertainty and volatility in European and US markets, BDO chief strategist Jonathan Ravelas said.
In a commentary entitled “2014: The Year Ahead—Philippines Shining Through,” Ravelas also expressed optimism that last year’s final gross domestic product (GDP) growth rate would still hit 6.75 percent. This is because typhoon-devastated Eastern Visayas only has a relatively small contribution of about 2 percent, in terms of output, to total GDP.
Looking forward, Metrobank said that Philippine GDP growth is expected to come in slightly slower at 5.6 percent in the earlier part of 2014, but reconstruction efforts can push the growth rate above 6 percent.
Metrobank also sees inflation inching up toward the 4 percent level this year likely due to domestic supply disruptions and higher global oil prices, prompting the Bangko Sentral ng Pilipinas to tighten monetary policy in the second semester.
The BSP will likely hike rates by 50 basis points in the second half, the bank said.
For 2013, domestic inflation remained below the BSP target range amid stable domestic supply and muted increase in global commodity prices. Inflation rate for the first 11 months stood at 2.8 percent after the November report came in at 3.3 percent.
Interest rates last year remained at record lows on high market liquidity, manageable inflation and rosy economic prospects. The BSP kept its overnight borrowing rate steady at 3.5 percent.
On the real economy, the Philippines has been growing by over 7 percent in the past five quarters. From January to September 2013, local GDP grew by 7.4 percent, higher than the 6.7 percent recorded in the same period last year.
Metrobank’s research note said while there’s still an appreciation bias for Asian currencies— including the peso—external jitters on the back of a still volatile global economy could still weigh on the outlook for these currencies.
The peso is seen to trend around the 42 level against the greenback given the tapering of the Federal Reserve’s easy money policy, Metrobank said.
