MANILA, Philippines—EconomiC activity likely remained sluggish in the first quarter of the year as the country continues to reel from the effects of Super Typhoon Yolanda last year.
According to the country’s top investment bank, a turnaround is expected in the months ahead on the back of reconstruction efforts and the sustained revival of the manufacturing sector, which may push the country’s growth closer to the state’s target for the year.
“The negative impact of Super Typhoon Yolanda on the economy is not likely to dissipate in early 2014,” First Metro Investments Corp. (FMIC) said in a report this week.
Due to the extent of the damage caused by Yolanda, it may take as long as six months for supply chains and income levels to normalize, said FMIC, in a report it published with the University of Asia & the Pacific (UA&P).
The firm said first-quarter growth could fall between 5.8 and 6 percent slower than the previous quarter’s 6.5 percent.
“But continued relief work and reconstruction should propel the economy back to its 7-percent growth path,” FMIC added.
Given FMIC’s projection, the country’s gross domestic product (GDP) could reach the state’s official target of 6.5 to 7.5 percent for the year.
Last year, the Philippine economy grew by 7.2 percent, outpacing all major economies in Southeast Asia. The Philippines also had the second-fastest growing economy in Asia last year, next to China.
The manufacturing sector may take the lead this year because of the improvement in exports and higher demand for construction materials for the completion of private residential and commercial projects, apart from reconstruction efforts.
“Preplanned infrastructure spending as well as new money for reconstruction, especially from foreign aid, should propel public construction spending,” FMIC said.
In a separate report, UK-based think tank Center for Economics and Business Research (CEBr) upgraded its growth forecast for the Philippines this year, despite the devastation wreaked by the super typhoon last November.
CEBr, in a report commissioned by the Institute of Chartered Accountants in England and Wales (ICAEW), said the Philippine economy could grow by 6.8 percent in 2014. This projection was better than the firm’s previous forecast of 5.8 percent.
However, ICAEW said, it still has doubts over the sustainability of the country’s growth past 2014.
“Stronger growth in investment and government spending are key factors contributing to Philippines’ growth in 2014,” ICAEW said in a statement. “However, lack of infrastructure development, high poverty levels and unemployment will hold back growth in 2015 and 2016 as construction and rebuilding activities taper off.”