Economy seen sustaining 7% growth

The Philippine economy will likely sustain a 7-percent growth this year, aided by additional spending for post-“Yolanda” reconstruction efforts, investment bank First Metro Investment Corp. said.

“We believe fundamentals will remain strong in 2014 as the country will benefit from the recovery of the global economy, particularly the United States and the emergence of the euro zone from recession. We expect emerging markets to stabilize in the next two years,” FMIC president Roberto Juanchito Dispo said in a briefing.

The global economic rebound will support the recovery of the export market while business process outsourcing and overseas Filipino remittances would continue to boost domestic demand, Dispo said. These, in turn, are expected to support a gross domestic product (GDP) growth of 7 to 7.5 percent this year, he said.

Also, he said the multiplier effect of the massive rehabilitation work in the aftermath of Yolanda would help drive growth.

Economist Victor Abola of the University of Asia and the Pacific, FMIC’s partner in macroeconomic research, said the additional spending for the Yolanda reconstruction would add at least 1.2 percentage points to GDP this year, bringing full-year GDP average growth to 7.3 percent.

The outlook for 2014 was thus seen favorable despite a potential 2-percent drop in agricultural output caused by natural calamities in 2013.

“Our fundamentals remain intact and we will be able to withstand volatilities in 2014, be it domestic or global,” said FMIC chair Francisco Sebastian.

FMIC-UA&P’s macroeconomic outlook for the Philippine economy this year is more optimistic than the market consensus forecast of 6.3 percent GDP growth for the year.

In the meantime, inflation is seen to remain manageable at 3.8 to 4 percent. It is seen to continue trending higher in the early part of the year but projected to decelerate before the end of the year.

Overseas Filipino worker remittances are seen to grow by 6-7 percent this year on the back of additional inflows to households affected by natural disasters. The joint FMIC-UA&P research expects demand for Filipino workers to be sustained.

The peso is seen to average 43 to 46 against the US dollar on the back of the recovery of the greenback. But Abola said this would favor domestic consumption given the increased peso conversion of remittances. At the same time, he said a weaker peso would support the housing market.

Oil prices are seen going down to an average of $95 per barrel from $98.42 in 2013.

Dispo said the risk factors for the year would include the murky outlook on the power industry. This was after the Supreme Court stopped power utility Manila Electric Co. from raising tariffs. Another variable is an ongoing probe by regulators on alleged collusion among power generation firms to keep energy prices high.

Other potential risks, he said, might stem from the pork barrel scam, the handling of the post-Yolanda reconstruction and a possible asset price bubble in the high-end property market.