Economic growth may not settle within gov’t target – GlobalSource

By Kathleen A. Martin 
(The Philippine Star) | Updated February 4, 2014 - 12:00am


MANILA, Philippines - Philippine economic expansion may not settle within the government’s 6.5 percent to 7.5 percent target this year, GlobalSource Partners said, amid a lack of new growth drivers.

“All told, the better-than-expected fourth quarter performance brought full year GDP (gross domestic product) growth to 7.2 percent, our pre-typhoon forecast,” Romeo Bernardo, analyst at the New York-based think tank said in a research note.

“Despite this, we remain less confident than other analysts that increased government spending for post-disaster reconstruction will bring 2014 growth above 6.5 percent, especially given its poor spending record recently,” he continued.

Bernardo said there are no expected growth drivers this year, especially as foreign investors flee emerging markets in part because of the prospect of less US monetary stimulus.

“Aside from the start of construction of a couple of PPP (public-private partnership) tollroads, we have yet to be convinced that there are new growth drivers in the horizon, particularly FDI (foreign direct investments),” Bernardo said.

“At the moment, we see increased risk of tighter domestic financial conditions as capital outflows increase which may dent consumer and business confidence,” he added.

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The central bank expects foreign direct investments reaching $2.6 billion this year, higher than projected $2.1 billion in 2013. Latest data showed foreign direct investments amounted to $3.361 billion as of October last year.

However, foreign portfolio investments are expected to fall to $2.1 billion this year from a net inflow of $4.2 billion in 2013 as volatility remain in global financial markets following the US Federal Reserve’s scaling back of monthly asset purchases.

“Additionally, we are hearing anecdotal accounts of reduced retail sales as consumers cut back spending on expectations of higher electricity bills ahead,” Bernardo said.

Manila Electric Co. (Meralco) in December announced a record-high P4.15 per kilowatt-hour rate hike but the plan has been put on hold by a temporary restraining order from the Supreme Court.

Of the total power rate hike, P2.41/kWh was planned for December, P1.21/kWh for February, and P0.53/kWh for March.

Meanwhile, inflation this year is seen to rise to 4.5 percent, near the upper-end of the central bank’s three to five percent target range.

http://www.philstar.com/business/2014/02/04/1286263/economic-growth-may-not-settle-within-govt-target-globalsource 

PH lacks drivers to grow beyond 6.5% this year, says think tank

By Doris C. Dumlao
Philippine Daily Inquirer

MANILA–The Philippines may lack growth drivers to lift domestic economic growth beyond 6.5 percent this year as post-disaster reconstruction spending may not deliver as expected, New York-based think tank Global Source said.

Despite the better-than-expected fourth quarter gross domestic product (GDP) expansion that brought full-year growth to 7.2 percent, Global Source economist Romeo Bernardo said the think tank remained “less than confident” compared to other analysts that increased government spending for post-disaster reconstruction would bring 2014 growth above 6.5 percent.

The research cited the government’s “poor spending record” recently, he said.

“Aside from the start of construction of a couple of PPP (public private partnership) tollroads, we have yet to be convinced that there are new growth drivers in the horizon, particularly FDI (foreign direct investments),” Bernardo said in a research note.

“At the moment, we see increased risk of tighter domestic financial conditions as capital outflows increase which may dent consumer and business confidence,” he said.

Bernardo also cited anecdotal accounts of reduced retail sales as consumers cut back spending on expectations of higher electricity bills ahead.

With a 6.5 percent GDP growth in the fourth quarter, full-year growth reached the top-end of the government’s revised forecast, confirming its assessment of SuperTyphoon Yolanda’s limited growth impact, the research noted.

Apart from the overall growth rate, Global Source said the good news from the fourth quarter GDP economic report card included stable, albeit slower, consumption growth (5.6 percent), double-digit growth in investments in durable equipment (15.5 percent) and continuing growth in exports of both goods and services (6.4 percent).

At the same time, he said the supply side showed continuing healthy service sector growth (6.5 percent) and accelerating manufacturing value-added (12.3 percent).

“On the other hand, weakness in public spending, which we warned about, is revealed in year-on-year declines in government consumption (-5.2 percent) and construction (-1 percent),” Bernardo said.

“Troubling as well is the 0.4 percent dip in private construction which followed last quarter’s growth slowdown to single digit, albeit this also reflects some base effects due to the impressive growth last year,” he added.

Meanwhile, Bernardo said the slow growth in goods imports (1.1 percent) was “puzzling” until his firm was reminded of reports of continuing smuggling, especially of oil.

Read more: http://business.inquirer.net/162902/ph-lacks-drivers-to-grow-beyond-6-5-this-year-says-think-tank#ixzz2sVoJgbs3