THE PHILIPPINE economy is on track to grow by 5.7 percent this year and by 6 percent next year on the back of resilient remittances and services exports as well as improving labor fundamentals, economists from British banking giant Standard Chartered Bank said.
Last week, it was reported that second quarter gross domestic product (GDP) had expanded by 5.6 percent year-on-year—close to the 5.7 percent market consensus.
This marked an improvement from the sluggish 5 percent growth in the first quarter. Seasonally adjusted quarter-on-quarter GDP grew by 1.8 percent.
“We think the GDP result, along with a benign inflation outlook, gives little impetus for the Bangko Sentral ng Pilipinas (BSP) to tweak policy rates this year,” Singapore-based Stanchart economists Jeff Ng and Edward Lee said in a research note dated Aug. 28.
“Domestic growth was strong, with domestic consumption, investment and net services exports more than offsetting the 4.5-percentage point (ppt) drag from net merchandise exports. This spurred demand for construction, retail trade and hotel/restaurant services,” the economists said.
The Stanchart report also noted that the Philippines’ household consumption had outperformed those of other Southeast Asian economies over the past four to five years while investment, or gross fixed capital formation, had also expanded consistently over the period, second only to Malaysia’s in the region.
The household consumption year-on-year growth of 6.1 percent in the first half, the economists said, marked the fastest semestral rise in household consumption since 2012. At the same time, the economists noted that labor conditions were benign, with the jobless ratio remaining relatively low at 6.4 percent as of April 2015.
Importantly, the economists said remittances had held up despite the soft global economy while investment also performed well, rising nearly 9 percent year-on-year.
Public construction and investment in durable equipment supported growth, the economists said. Investments in durable equipment and machinery—particularly mining construction machinery—and road vehicles stood out, they noted.
“Interestingly, while external demand has been weak for other countries so far this year, the Philippine economy was supported by services exports, particularly business process outsourcing services. Services exports contributed 2.9 percentage points (ppt) to overall growth, mitigating the 1.2-ppt subtraction from merchandise exports. However, imports were strong, which still led to a net negative 3.8ppt contribution from external demand,” they said.