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MANILA–The Philippines may lack growth drivers to lift domestic economic growth beyond 6.5 percent this year as post-disaster reconstruction spending may not deliver as expected, New York-based think tank Global Source said.
Despite the better-than-expected fourth quarter gross domestic product (GDP) expansion that brought full-year growth to 7.2 percent, Global Source economist Romeo Bernardo said the think tank remained “less than confident” compared to other analysts that increased government spending for post-disaster reconstruction would bring 2014 growth above 6.5 percent.
The research cited the government’s “poor spending record” recently, he said.
“Aside from the start of construction of a couple of PPP (public private partnership) tollroads, we have yet to be convinced that there are new growth drivers in the horizon, particularly FDI (foreign direct investments),” Bernardo said in a research note.
“At the moment, we see increased risk of tighter domestic financial conditions as capital outflows increase which may dent consumer and business confidence,” he said.
Bernardo also cited anecdotal accounts of reduced retail sales as consumers cut back spending on expectations of higher electricity bills ahead.
With a 6.5 percent GDP growth in the fourth quarter, full-year growth reached the top-end of the government’s revised forecast, confirming its assessment of SuperTyphoon Yolanda’s limited growth impact, the research noted.
Apart from the overall growth rate, Global Source said the good news from the fourth quarter GDP economic report card included stable, albeit slower, consumption growth (5.6 percent), double-digit growth in investments in durable equipment (15.5 percent) and continuing growth in exports of both goods and services (6.4 percent).
At the same time, he said the supply side showed continuing healthy service sector growth (6.5 percent) and accelerating manufacturing value-added (12.3 percent).
“On the other hand, weakness in public spending, which we warned about, is revealed in year-on-year declines in government consumption (-5.2 percent) and construction (-1 percent),” Bernardo said.
“Troubling as well is the 0.4 percent dip in private construction which followed last quarter’s growth slowdown to single digit, albeit this also reflects some base effects due to the impressive growth last year,” he added.
Meanwhile, Bernardo said the slow growth in goods imports (1.1 percent) was “puzzling” until his firm was reminded of reports of continuing smuggling, especially of oil.