Election spending seen to fuel 6.2% growth in ’16

The Philippine economy can grow by 6.2 percent this year on the back of election spending and an improvement in external markets, an economist from Ayala-led Bank of the Philippine Islands said.

BPI economist Emilio Neri Jr. said in an interview that this year was, however, fraught with greater risks compared to 2015, given the tension, the likelihood of further devaluation of the Chinese currency and political uncertainties that might arise from the change in leadership in the country.

“After the May elections, there’s going to be a minimum of six-month transition period… There could be a shift in focus from ‘Daang Matuwid’ (righteous path) to something else,” Neri said.

But Neri said the adjustment would not likely take longer than three quarters. In less than a year, he said the economy should head back to its long-term growth trajectory of 5.5 to 6.5 percent.

Most of the projected 6.2-percent gross domestic product (GDP) growth for this year, Neri said, would come in the first half of the year and it could be slower in the second half.

The growth outlook is a bit higher than the market consensus forecast of 5.9 percent for this year.

“We continue to expect existing infrastructure projects in the pipeline to contribute to faster construction activity because of the elections,” Neri said.

On external markets, Neri said global trade could be stronger.  “We’re seeing a sustained rebound in the Europe, the US economy is strong enough to hike interest rates and we believe emerging markets have seen the bottom in terms of their contraction and deceleration,” he said.

In particular, Neri said he was not as concerned as other economists about China’s slowdown. BPI thinks China could sustain a growth of 6-7 percent this year.

“It’s slower but strong enough to provide demand. So that should be catalyst for a slight rebound in exports across Asia,” he said.

But while he does not believe that China would suffer hard landing, Neri said the devaluation of its currency would likely continue.

BPI sees the peso depreciating by about 4 percent against the US dollar to end the year at 49.02:$1.