Election spending to bolster 2016 economic growth faster than 2015 expansion

The economy is expected to grow faster this year than the 5.8-percent expansion posted in 2015 mainly on the back of election spending boost.

READ: PH economy grew 5.8% in 2015

Meanwhile, the Department of Finance’s chief economist on Friday urged additional investments in public infrastructure to support robust growth.

“To sustain economic growth, more investment in infrastructure such as in power and transportation should be mobilized,” Finance Undersecretary Gil S. Beltran said in an economic bulletin.

Furthermore, financial institutions were more bullish this year as the country holds the upcoming presidential elections in May.

“For 2016, we reiterate our GDP [gross domestic product] growth forecast of 6.5 percent, which reflects our view that the elections in May will likely further boost already healthy domestic demand, rather than act as a headwind. We expect more fiscal support to growth from further progress on the implementation of infrastructure projects, which should also crowd in private investment and FDI [foreign direct investment],” Japanese financial giant Nomura said in a note last Thursday.

For Metrobank Research, growth in 2016 is expected at 6.3 percent, research analyst Pauline May Ann E. Revillas said in a note also last Thursday.

“Government spending growth is seen to be sustained until at least the first half as the government front-loads its budget expenditures. Consumption spending will remain robust amid the still soft commodity prices, low interest rates, and solid remittance inflows. Election spending is expected to support key services such as transportation, communication, and storage, business activities, and retail trade. A slight pickup in manufacturing is also seen as exports of electronics slightly improve,” Revillas explained.

However, the agriculture sector is seen remaining “weak” amid the onslaught of the dry spell due to El Niño during the first semester, she said.

For ING Bank Manila senior economist Joey Cuyegkeng, the economy would grow 6.2 percent this year on the back of “support coming from government infrastructure spending as well as election spending,” noting that the government has already front-loaded spending ahead of the Mar. 25 start of the election ban on roll-out of projects.

Citi Research said it raised its 2016 GDP growth forecast to 5.4 percent from 5.1 percent previously, although robust election spending cannot sustain strong economic expansion by the second half. “Amid the global economic slowdown and market volatility, the post-election investment momentum should slow down,” Citi Research economist Jun Trinidad said in a note last Thursday.

“Learning curve effect as the new government takes over weighs on fiscal spending while the business community awaits the new policy agenda. From first-quarter growth of 7.4 percent year-on-year, we expect domestic demand to ease to sub-5 percent year-on-year in the fourth quarter but with consumption in the driver seat,” Trinidad explained.

Furthermore, he added that “lacking meaningful 2016 export gains restrain prospects” for faster economic growth this year. RAM

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