DBS: GDP likely grew by 6.2% in 4Q, entire ’14

DBS Bank Ltd., the biggest bank in Southeast Asia, has projected the Philippine economy to have grown by 6.2 percent both in the fourth quarter as well as the entire 2014, a forecast more bullish than that of the government.

The fourth quarter and full-year 2014 gross domestic product (GDP) growth figures will be released by the government next week.

Early this month, the Cabinet-level Development Budget Coordination Committee or DBCC conceded that the 2014 GDP expansion may have “settled realistically” at just 6-7 percent, whose lower end was below the goal of 6.5-7.5 percent.

In an e-mail to reporters yesterday, DBS economist Gundy Cahyadi said that while consumer spending had remained robust, anemic government spending has slowed growth in sectors such as construction.

“Delays in some public infrastructure projects have led to growth in the construction sector easing to about 5 percent in 2014, from 10 percent in 2013 and 17 percent in 2012,” Cahyadi noted.

Lower government spending last year, which was mainly due to a judicial decision that stopped the flow of more money from the controversial Disbursement Acceleration Program (DAP), also “adversely affected” the sentiment among business owners, the DBS economist said.
The Supreme Court has ruled that the DAP, a stimulus package aimed at fast-tracking public spending to spur economic growth, was unconstitutional.

But Budget Secretary Florencio B. Abad had said that in 2015, underspending “will not be tolerated” anymore, as the government plans mechanisms encouraging faster disbursements while penalizing the opposite.

In this regard, Cahyadi said the government’s consumption growth may return to 7.5 percent this year—the same average levels in 2012 and 2013, but warned of “some downside risk.”

“Public scrutiny on the government remains prevalent since the DAP controversy first blew out in mid-2014,” he pointed out.

But as the government aspires to spend more in 2015, efforts aimed at increasing investments as well as improving infrastructure would likely benefit.

“Overall investment growth is likely to remain strong at 8-percent pace. The infrastructure overhaul remains the policy focus for the government, despite the setbacks in 2014. Infrastructure spending is set to rise to 5 percent of GDP by 2016, from about 2-3 percent currently. This is likely to form the underlying support for investment in the private sector as well,” Cahyadi said.