Govt likely to reach 5pct-6pct target, say experts

The Economy is seen to grow faster this year with the government likely to reach its 5 percent-6 percent target, supported by the national government’s spending, strong remittances inflows from overseas Filipinos and consumer spending, First Metro Investment Corp. (FMIC) and University of Asia and the Pacific yesterday said.

“The country’s GDP (growth domestic product) is projected at 5 percent-6 percent [this year] anchored on an anticipated increase in government spending, robust dollar remittances from OFWs (overseas Filipinos workers) and higher consumption spending,” FMIC chair Francisco C. Sebastian said yesterday at the joint FMIC and University of Asia and the Pacific (UA&P) 2012 Economic Outlook briefing.

“The Philippines has shown economic growth in the last two years and the outlook for 2012 is positive,” he added.

FMIC’s economic growth projection for this year is in line with the government’s 5 percent-6 percent target growth.

For his part, UA&P economist Victor A. Abola said, “We think the domestic sector will do well and the lagging sectors last year will bring the economy into the fast lane,” referring to the agriculture, mining, construction and manufacturing sectors.
The agriculture industry was plagued by typhoons during the second half of last year. Mining activities, meanwhile, were slowed down by heavy rains last year.

As for the government’s spending, besides its big-ticket items under its public-private partnership (PPP) programme that is expected to boost spending this year, the Department of Public Works and Highways’ (DPWH) other infrastructure projects are expected to sustain economic growth this year.

“Besides the PPP, projects of the DPWH, which include road repairs and construction of tolls would increase government spending,” FMIC president Roberto Juanchito T. Dispo said.
The Budget department will release more than P140 billion for infrastructure spending in the first half of the year, which is around 60 percent of its total budget.

Meanwhile, remittance inflows, Abola said, are seen to still grow by 5 percent-7 percent this year despite the US and euro zone debt crises.

The central bank forecasts remittances to grow by 7 percent last year and 5 percent this year. As of October, remittances totalled $16.5 billion.

Meanwhile, exports are seen to grow by 5 percent-7 percent coming from a “negative performance” last year, while imports will likely grow by 10 percent, Abola said.

“Exports will likely recover on the back of a steady growth of the US economy and a possible soft-landing of China,” he said.
Inflation this year is seen to ease within the 3.5 percent-to-3.7 percent range.

Meanwhile, Dispo pointed out that the central bank’s expected monetary policy easing this quarter given a benign inflation environment, will further boost economic growth as corporates would deem lower interest rates favourable to expand operations.

Abola said, the peso-dollar exchange rate this year is seen at P43-P45 per dollar as the US economy is expected to continue to outperform the euro zone and Japan that will firm its status as market players’ safe haven. In turn, the peso will depreciate against the dollar.

At the local debt market, Reynaldo B. Montalbo, Jr., FMIC senior vice-president said yields will continue to drop this year amid high market liquidity and investors’ demand for investment instruments.

By yearend, 25-year securities are expected to fetch 6 percent; 20-years, 5.6 percent; 10-years, 5 percent; five-years, 4.75 percent and 91-day Treasury bills 3 percent.

For the equities market, Bede Lovell S. Gomez, FMIC assistant vice-president, said: “The PSEi (Philippine Stock Exchange index) is seen to reach the 5,000 level by yearend” due to a low interest rate environment, receding inflation, the implementation of PPP, higher consumer spending, a possible credit upgrade and growth in tourism sector.

He noted that the gaming, infrastructure and consumer sectors would remain favourable for investors.

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Category: Philippines