Full-year growth may hit gov’t goal

MANILA, Philippines–Philippine economic growth can hit the government’s target of at least 7 percent this year, given the falling oil prices and a rebound in government spending, economists said.

Luz Lorenzo, an economist at Maybank Kim Eng, said the recovery seen in the fourth quarter of 2014 would likely continue this year enabling the economy to hit the 7-percent growth target.

Lorenzo said that as the regime of low prices would likely extend this year, purchasing power would improve and drive private consumption growth faster. Consumption is deemed  the most important component of the GDP (gross domestic product).  She added that lower fuel prices would also temper the size of the oil import bill.

“The subdued import growth may continue and the positive contribution of net exports may be sustained this year,” she added.

A research team from Bank of the Philippine Islands, however, expressed concern about the fact that capital outlays—excluding purchases of vehicles—continued to perform poorly.  The team said this could mean that the productive capacity and quality of the economy’s growth might improve only marginally compared to the last three years.

As such, a BPI research note said the country’s potential growth would remain at about 6 percent while unemployment and poverty would stay high.

Still, BPI sees a GDP growth rate of at least 6.5 percent in 2015 under a “conservative” scenario of a modest rebound in oil prices by the third quarter to $60-$70 per barrel and that government outlays would fall short of target.

“The upside risk to our central scenario for GDP growth could come from a protracted low oil price environment and a surprise performance in national government spending. These two factors alone could help the Neda achieve its 7-8 percent growth target for this year,” the research said.

Downside risks are seen coming from negative geo-political surprises from Russia or the Middle East, a possible Greek exit from the currency union, or even potential power outages in key Philippine business districts by the second quarter, the BPI research said.

“This validates our view that the BSP is not poised to cut policy rates this year and temper growing expectations among market analysts that the low oil prices will compel the local monetary authorities to consider easing monetary policy in 2015,” the research note said.