Local, foreign economists expect 2016 GDP expansion at 6.7%-7%

The typhoons that impacted on agricultural production in the last three months of last year likely dragged gross domestic product (GDP) growth lower during the quarter, although economist polled by the Inquirer expected the full-year figure to have settled near the upper end of the government target despite the transition to a new administration.

Nine of 10 financial institutions asked said they expected a lower fourth-quarter GDP expansion than the better-than-expected 7.1-percent growth posted in the third quarter or the first three months of the Duterte administration.

The government will announce the fourth quarter as well as full-year GDP growth figures on Thursday.

Only Moody’s Analytics had a higher forecast of 7.2 percent for the October-to-December period. “This would be the seventh consecutive quarter in which year-on-year GDP growth accelerated. The main driver of output growth will continue to be domestic demand, with private consumption and investment both expanding rapidly. Goods exports should also post a modest improvement compared with previous quarters because of the uptick in global demand in recent months,” the research arm of Moody’s Corp. said.

DBS Bank Ltd. economist Gundy Cahyadi said Philippine GDP likely grew 6 percent year-on-year in the fourth quarter, bringing the full-year expansion to 6.7 percent.

The government targeted a growth of 6-7 percent in 2016. At the end of the first nine months, GDP expansion averaged 7 percent, one of the fastest among emerging economies.

“Ahead of the fourth-quarter GDP release [this] week, the government reported that farm output declined by 1.11 percent year-on-year in the fourth quarter. This indicates another weak number in the agricultural sector for the fourth quarter, capping the gains in investment,” noted Eugenia F. Victorino, ANZ Research economist for South and Southeast Asia.

Victorino said they expected growth in the fourth quarter to have eased to 6.1 percent, although the full-year average would be a higher 6.7 percent.

For economist Euben Paracuelles of Japanese financial giant Nomura, fourth-quarter GDP growth slowed to 6.4 percent “given more stable growth in the industrial sector and a significant decline in agriculture output due to the impact of two typhoons.”

“This will bring full-year 2016 growth to 6.8 percent, which is at the high end of the government’s target,” Paracuelles added.

In a Jan. 12 report, Deutsche Bank Research said it expected 2016 expansion at 6.8 percent as the growth momentum drifted lower and eased to 6.5 percent in the fourth quarter.

“While still above trend, our growth momentum measure drifted lower in October/November as motor vehicle sales, remittances and factory output weakened pace (against non-oil imports, real credit growth and employment, which gained pace). Manufacturing output according to the Purchasing Managers’ Index survey also slowed a tad in the fourth quarter, albeit remaining solid, weighed down by slower input buying and employment. Likewise, exports are unlikely to prop up overall output, with growth pared down by higher commodity prices,” Deutsche Bank said.

Rajiv Biswas, Asia-Pacific chief economist at IHS Markit, projected a moderation in fourth-quarter growth to 6.5 percent to bring the end-2016 average to 6.8 percent.

“Consumption expenditure continued to be a key growth driver in 2016, with private consumption boosted by strong consumer confidence and robust overseas worker remittances, while public consumption was helped by election-related spending in the first half of the year. Rapid growth in the information technology-business process outsourcing (IT-BPO) industry is continuing to boost exports of IT-related services as well as creating rapid employment growth in the IT-BPO sector and catalyzing the development of office parks in major cities. The manufacturing sector showed very rapid expansion, helped by strong domestic demand. However one sector that acted as a drag on growth was manufacturing exports, with electronics exports remaining weak despite a pickup in global electronics demand in the second half of 2016,” Biswas said.

For Bank of the Philippine Islands vice president and chief economist Emilio S. Neri Jr., the economy grew 6.6 percent in the fourth quarter and 6.9 percent for the entire 2016. “Hefty growth was sustained in the fourth quarter as government sustained spending just as the private sector continued to expand [its] fixed capital outlays. Household spending likely remained one of the strongest in the region but higher oil prices may have been a slight damper. Agriculture reverted to contraction due to bad weather but industry and services likely managed to sustain their rapid growth led by construction and trade. The transport sector may have been mildly weighed down by higher petroleum prices quarter-on-quarter,” Neri explained.

Standard Chartered Bank economist for Asia Chidu Narayanan said he expected GDP growth at 6.7 percent in the fourth quarter such that full-year expansion averaged 6.9 percent. “Fourth-quarter growth was also likely driven by still-robust domestic demand and continued services-sector growth,” Narayanan said.

In a note to clients, Metrobank research analyst Pauline May Ann E. Revillas said they expected the fourth quarter 2016 GDP growth to come in at 6.8 percent, making the full-year average growth at 6.9 percent.

Land Bank of the Philippines market economist Guian Angelo S. Dumalagan said fourth-quarter expansion likely hit 6.9 percent, bringing the average 2016 growth to 7 percent.