Economic growth still impressive, says HSBC

The Philippine economy’s performance in the first quarter, which fell short of all expectations, was still impressive and would likely prove to be a one-time slump in the country’s climb.

British bank HSBC in a note to investors said the economy’s main growth driver—household consumption—would remain strong, thanks to remittance flows and the country’s young population.

“Optimism is riding high in the Philippines and the slower-than-expected growth rate in Q1 2014 will not dampen the mood,” HSBC said late Thursday.

The government this week reported that the economy grew by 5.7 percent in the first quarter of 2014, slower than the 6.3-percent expansion of the previous three-month period. The growth was also lower than all analyst and government projections, and the slowest since the fourth quarter of 2011.

Effects of Supertyphoon “Yolanda” (international codename: Haiyan), which proved to be more severe than initially expected, was the main culprit for the slowdown in the growth. Private sector investments were also sluggish, failing to keep up with the government’s higher spending for infrastructure and other social projects.

Despite the disappointing performance, the Philippines was still “stronger than it looks,” the bank pointed out.

HSBC said slow global demand for the country’s exports also held growth down in the period. A report on Friday showed the economy of the United States, which is the Philippines’ largest trading partner, shrank by 1 percent in the January to March period.

The country also had to deal with two major natural disasters, namely Yolanda and the 7.2-magnitude earthquake in Visayas in October, HSBC noted. Given these challenges, HSBC said economic growth was “still rather impressive.”

“Growth … was still above trend, reflecting sticky household consumption and gradually rising investment,” HSBC said.

“Private consumption has consistently contributed about four percentage points per quarter to year-on-year growth in the past two years,” the bank said. This was thanks to “sticky” remittance inflows and strong demographic transitions, which fuel demand for key goods such as food and garments, the bank added. Paolo G. Montecillo