Full-year economic growth seen at 5.5%

INQUIRER/ MARIANNE BERMUDEZ

MANILA, Philippines–The Philippine growth momentum is slowing but domestic demand seems strong enough to bring a full-year growth close to 5.5 percent this 2012, said New York-based think tank Global Source.

But given the still negative outlook on global growth next year, Global Source lowered its 2013 gross domestic product forecast for the Philippines to 5 percent from 5.5 percent.

The think tank pointed out that a 5-percent growth outlook for next year, however, was “still an optimistic forecast that partly depends on elections and related public spending helping to drive growth.”

The government reported last week that the country’s second quarter GDP had grown by 5.9 percent year-on-year versus a revised growth of 6.3 percent in the first quarter. This brought the first semester growth rate to 6.1 percent.

In a market brief entitled “Slowing Momentum,” dated Aug. 30 written by Filipino economists Romeo Bernardo and Margarita Gonzales, Global Source noted that the country’s second quarter growth was close to what most analysts were expecting, with demand largely driven by strong private consumption and continued rise in government spending.

“The momentum seems to be weakening though, with seasonally- adjusted GDP growth dropping to 0.2 percent quarter-on-quarter in the second quarter from 3 percent quarter-on-quarter in the first quarter,” the report said.

Without a boost from base effects, the report noted that government consumption had grown by just 5.9 percent in the second quarter from 20.9 percent in the first quarter.

Meanwhile, Global Source pointed out that public construction had still expanded by over 45 percent, recovering from about a 50 percent drop last year. In contrast, private construction, coming from high growth in 2011, posted another quarter of negative growth this year (-2.6 percent), it said.

“The country continued to post positive net exports during the period, owing to a sustained albeit moderate revival in exports. The contribution of merchandise export growth may weaken moving forward given the dim outlook for the global economy,” the report said.

Sales of the country’s electronic and semiconductor firms, which account for more than half of the total, still declined based on the latest statistics (by 14.6 percent in June), the research said. However, it said the economy should find support from services exports, which grew by 9.9 percent in the second quarter.

“The country’s BPO (business process outsourcing) firms seem to be resilient so far to global crises,” the research said.

On the supply side of the national accounts, real estate, renting and business activity (which includes BPO services) registered robust growth of about 8.5 percent in the second quarter, it noted.

The research noted that services sectors were almost uniformly strong with the exception of government services (public administration and defense and compulsory social security), which grew by just 2.1 percent. Also on the production side, it said industry had continued to perform well owing to construction and utilities (10 percent and 6.2 percent respectively).

On the other hand, Global Source said manufacturing growth had “somewhat lost steam,” easing to 4 percent from 6 percent in the first quarter and 5.8 percent in the same quarter last year.

“All in all, despite slowing momentum, domestic demand seems strong enough in the first half to bring full-year growth to above 5 percent this year,” said Global Source, adding the growth would likely be closer to 5.5 percent.

Socioeconomic Planning Secretary Arsenio Balisacan said last week that the growth outlook of 5-6 percent for the full year would still be “well within reach.”

“The government, however, remains vigilant about risks to our growth. Further weakness of a struggling global economic recovery will remain a strong challenge in the near-term, with the slowdown of China reining in on global growth,” Balisacan had said.

The intensification of the Euro Area problem and the geopolitical uncertainty are also seen as external risks which can cause spikes in the world price of oil.

“Another downside risk is the El Niño phenomenon, which, according to experts, will commence on the third quarter of the current year until the first quarter of 2013. This type of El Niño, according to experts, will be weak to moderate. This will impact on the agriculture sector, although this will be mitigated partly by our investments in irrigation,” Balisacan said.