New jobs seen sustaining GDP growth of at least 7%

The more than two million jobs created last year will help sustain a gross domestic product (GDP) growth of at least 7-percent in the medium term such that the Philippines would be able to entice more foreign investors, according to Metrobank Group’s First Metro Investment Corp. (FMIC).

“Latest economic data released by the government indicate that the Philippine economy is firmly on track along a 7 percent or higher growth path,” FMIC said in its January 2017 The Market Call report prepared jointly with the University of Asia and the Pacific capital market research.

For instance, “the 2.1 million new jobs in 2016 will likely support the trend of 1.1 million Filipinos annually moving out of poverty between 2012 and 2015 into 2016 and beyond,” FMIC said.

“This, together with higher peso value for OFW remittances, will ensure a solid base of 7 percent and above-growth in consumer spending, which accounts for more than 70 percent of GDP,” it explained.

This year, the government targets GDP growth of 6.5-7.5 percent before further expanding by 7-8 percent annually next year until 2022.

The government’s target for 2016 was 6-7 percent and economist polled by the Inquirer last week said they expected full-year GDP expansion to hit the higher end of the target. The government will announce the fourth-quarter as well as full-year 2016 economic performance on Thursday.

FMIC nonetheless said that “investment spending should remain as the main growth driver as we expect continued double-digit growth in capital goods imports, similar to the construction sector.”

FMIC said it expected the construction industry to be buoyed up by aggressive infrastructure spending by the government and private residential and commercial construction that have shown a recent pick-up.

For 2017, the Duterte administration has programmed to spend P850 billion or 5.3 percent of the GDP on hard infrastructure, en route to bringing the infrastructure spending-to-GDP ratio to more than 7 percent by 2022.

Given the plan to ramp up infrastructure spending, FMIC said foreign direct investments (FDIs) would resume to take a faster pace in 2017 as Philippine economic numbers continue to impress foreign investors, especially the Japanese, Chinese, South Koreans and Taiwanese.

“These Asian investors will offset any slowdown of US and eurozone [including UK] investments should they continue to focus on non-economic issues,” FMIC added.

The government targets to generate $7 billion in FDIs this year. The latest Bangko Sentral ng Pilipinas data showed that FDI inflows from January to October last year reached $6.22 billion.

Separately, UK-based Oxford Economics said it expected the Philippine economy to have had expanded by 6.9 percent last year “largely on the back of robust domestic demand—private consumption and investments were particularly strong this year,” said Beatrice Tanjangco, its country economist for the Philippines.

But for this year, Tanjangco said Oxford Economics forecast GDP growth to exceed 6 percent, but not necessarily reach 6.5-7.5 percent.

“The absence of external stimuli such as an election should entail more moderated growth,” Tanjangco explained. “We hesitate making further revisions to our forecast upward on account of the uncertainty expected in 2017, and the expectation of further tightening of monetary conditions around the world as well as potentially slower global trade. Private consumption is expected to remain robust and some stimulus from the government is expected as they roll out an impressive infrastructure program, but delays on projects might hold-off the latter’s upside risk.”

Tanjangco nonetheless pointed out that at this point, it would be good to note that growth above 6 percent would still put the Philippine economy well above its peers in the region as it was still quite strong.

As for French financial firm Natixis, economist Trinh Nguyen said they expected fourth-quarter economic expansion to have had slowed to 6.5 percent year-on-year compared with the third quarter’s better-than-expected 7.1 percent due to “a widened trade deficit and slower investment.”