image source: politico.com
Moody’s ups outlook for Philippines
MOODY’S Analytics has raised its full-year economic growth forecast for the Philippines following a surprisingly strong second quarter, but warned that continued government underspending amid tightened monetary policy could slow expansion next year.
“With the latest Q2 numbers, 2014 GDP growth [could hit] 6.2%. This sounds more realistic,” Moody’s Analytics senior economist Glenn Levine said in an e-mail yesterday, citing “exports [and] solid consumer demand” as drivers.
Second-quarter economic growth bested expectations after it expanded at a faster 6.4% from a downwardly revised 5.6% in the first three months of the year. The latest result, however, was still slower than the 7.9% notched in the April-June period a year ago.
For the first half, gross domestic product (GDP) growth averaged 6%, slower than the 7.2% notched in the same six months in 2013.
The government targets GDP to grow 6.5-7.5% this year.
Last March, Mr. Levine had said GDP expansion could slacken to 5.8% this year from the two consecutive years of stellar growth of 6.8% in 2012 and 7.2% in 2013, in line with a projected region-wide slowdown as downside risks within and outside Asia Pacific persist.
A Moody’s Analytics report released separately yesterday said economies in Southeast Asia “are expected to expand 4.3% in 2014, well below their recent trend rate just over 5%.”
Nonetheless, the Philippines was cited for being one of the two strongest performers in the region in the first half of 2014, the other one being Malaysia.
The report -- written by Moody’s Analytics economist Fred Gibson -- noted that the Philippines “has shrugged off” effects of typhoon Yolanda which devastated parts of central Philippines on Nov. 8-9, while saying that political uncertainty has weighed on Indonesia and Thailand.
Growth prospects for the region are nevertheless much brighter next year due to “firming global demand and stronger domestic spending.”
“Export earnings are projected to improve over the next 18 months in line with firming global demand,” the report read.
“The US economy is on a sustained upward trend and the Chinese economy is responding positively to the government’s stimulus.”
“The outlook is sanguine for companies involved in the production of smartphones and PCs (personal computers) as the global tech cycle continues to trend higher. Thailand, Malaysia and Singapore will benefit,” it added.
IMPERILED
Second-quarter economic growth bested expectations after it expanded at a faster 6.4% from a downwardly revised 5.6% in the first three months of the year. The latest result, however, was still slower than the 7.9% notched in the April-June period a year ago.
For the first half, gross domestic product (GDP) growth averaged 6%, slower than the 7.2% notched in the same six months in 2013.
The government targets GDP to grow 6.5-7.5% this year.
Last March, Mr. Levine had said GDP expansion could slacken to 5.8% this year from the two consecutive years of stellar growth of 6.8% in 2012 and 7.2% in 2013, in line with a projected region-wide slowdown as downside risks within and outside Asia Pacific persist.
A Moody’s Analytics report released separately yesterday said economies in Southeast Asia “are expected to expand 4.3% in 2014, well below their recent trend rate just over 5%.”
Nonetheless, the Philippines was cited for being one of the two strongest performers in the region in the first half of 2014, the other one being Malaysia.
The report -- written by Moody’s Analytics economist Fred Gibson -- noted that the Philippines “has shrugged off” effects of typhoon Yolanda which devastated parts of central Philippines on Nov. 8-9, while saying that political uncertainty has weighed on Indonesia and Thailand.
Growth prospects for the region are nevertheless much brighter next year due to “firming global demand and stronger domestic spending.”
“Export earnings are projected to improve over the next 18 months in line with firming global demand,” the report read.
“The US economy is on a sustained upward trend and the Chinese economy is responding positively to the government’s stimulus.”
“The outlook is sanguine for companies involved in the production of smartphones and PCs (personal computers) as the global tech cycle continues to trend higher. Thailand, Malaysia and Singapore will benefit,” it added.
IMPERILED
In the case of the Philippines, however, expansion of economic activity in the country could be imperiled by slow public and private spending, Mr. Levine said separately by phone yesterday.
“The fixed investment cycle is slowing quickly, both from the private sector and public sector. It’s fading quickly. The PPP (public-private partnership) pipeline has slowed,” Mr. Levine noted.
“That, coupled with slightly higher interest rates that run through investment channels, could ease GDP growth to 5.5% next year.”
Data released by the Bureau of the Treasury last Friday put the budget gap last month at just P1.8 billion -- down 97% from P53.2 billion a year ago -- as revenues grew 15% to P166.7 billion from P144.6 billion while expenditures fell 15% to P168.5 billion from P197.8 billion.
The government has set a P550.977-billion spending target for this quarter alone, of which P107.884 billion -- nearly a fifth -- is supposed to go to infrastructure needed to support accelerating economic activity.
July’s tally, in turn, nearly halved the budget gap to just P55.7 billion in the first seven months from P104.5 billion the past year, as revenues grew 12% to P1.101 trillion from P984.1 billion and expenses edged up just 6% to P1.156 trillion from P1.089 trillion.
Mr. Levine thus pressed the government to accelerate spending, particularly on ports, roads, airports, and utilities, “to get the push we need.”
STABLE SUPPORT
Another analyst, however, expects other drivers of growth to provide stable support for now.
In a separate note yesterday, economist Jun Trinidad of the research arm of Citigroup Global Markets, Inc., said “hopefully, private sector activities will continue to offset weak fiscal contribution to growth as evidenced by the second-quarter GDP growth... despite real fiscal expenditures were down 2.2% year on year.”
“This highlights benefits of investment-driven growth over the past years that resulted in a more diversified GDP growth base -- from non-tech manufacturing to BPO (business process outsourcing) and transport services. Any sector bbenefitingfrom investment flows can provide the upside growth surprise aside from the OFW (overseas Filipino workers) remittance story.”
Mr. Trinidad added that initial state spending slowdown after the Supreme Court ruled as illegal in July “acts and practices” to implement the Disbursement Acceleration Program (DAP) -- which the administration had described as a stimulus measure -- should lift as soon as the dust settles on this controversy.
“Post-DAP brouhaha, legal clarity of what can and cannot be done within the budget system would no longer be a botteneck [sic],” Mr. Tridinad wrote, adding this would leave the usual weather and systemic constraints as the only real hurdles to growth.
“Other than inclement weather, fiscal challenge would be down to absorptive capacity constraints.” - Business World Online
