Philippine Economy beats forecasts - makes PH 'fastest in Asia'

A bird’s eye view of two buildings under construction in Manila.

7.1% third-quarter GDP growth makes PH ‘fastest in Asia’

Growth in Philippine gross domestic product (GDP) exceeded expectations for the third quarter of 2016, accelerating to 7.1 percent from a revised 6.2 percent a year earlier, making the country the fastest growing Asian emerging economy among those that have released third-quarter data so far, the government said on Thursday.

The third-quarter GDP rate from data released by the Philippine Statistics Authority (PSA) surpassed forecasts of 6 percent to 6.9 percent by economists polled earlier by The Manila Times, as well as the actual growth performance posted by China, Vietnam, Indonesia and Malaysia for the period.

“[Ours is] higher than China’s 6.7 percent, Vietnam’s 6.4 percent, Indonesia’s 5.0 percent, and Malaysia’s 4.3 percent. India has not yet released its data,” said a statement by Socioeconomic Planning Undersecretary Rosemarie Edillon, delivered at a press briefing by National Economic Development Authority (NEDA) Director Reynaldo Cancio.

Philippine economic growth in July-September also gained momentum from the second quarter of this year, when GDP registered a 7 percent expansion.

It was also the fastest growth for the country since GDP swelled 7.5 percent in the second quarter of 2013.

The third-quarter 2016 results bolstered cumulative growth for the nine-month period to 7 percent, the official PSA data showed.

Growth drivers

“From the demand side, investments continued to drive this economic growth, indicating its sustainability,” the statement read out by Cancio said.

Public construction surged by more than 20 percent; private investment in construction rose 16.2 percent; private consumption by 7.3 percent; and exports of goods by 7.8 percent.

Household consumption remained a pillar of strength for the domestic economy, Cancio said, noting upbeat consumer confidence as households put enrolment expenses at the top of their budget priorities.

“The higher private consumption is also supported by low inflation, low interest rates, better labor market conditions and the steady, though slower growth in overseas Filipinos’ personal remittance. Government assistance such as the Pantawid Pamilyang Pilipino Program, or 4Ps, also provided additional boost to consumer demand,” Cancio said.

From the supply or production side, the NEDA official noted recovery signs in agriculture, which grew by 2.9 percent after a prolonged drought caused by the El Nino phenomenon.

Industries expanded by 8.6 percent, with manufacturing and construction stronger, while utilities registered steady growth. Services eased to 6.9 percent from the previous quarter and from a year earlier.

On track for full-year target

Finance and economic managers said growth expansion in the third quarter means the government is on track toward attaining its growth target for the full year.

The government has set a full-year 2016 growth target of 6 percent to 7 percent. Analysts have forecast GDP would grow between 6.4 percent and 7 percent during the year.

For the first nine months of 2016, the economy grew by 7 percent, gaining traction from 5.7 percent a year earlier.

The central bank sees the GDP results indicating no need to change its monetary policy setting.

The NEDA said for the fourth quarter, the economy only needs to grow by at least 3.4 percent to hit the low-end target of 6 percent. To reach the high end of 7 percent, it would need to grow by 6.9 percent in the fourth quarter, the economic planning body said.

“Together with a low inflation environment, sustained strong growth bodes well for continued poverty reduction this year. The services sector and sustained strong fiscal spending are also likely to continue to drive growth in the fourth quarter. Robust domestic demand will continue to bolster growth in the near term,” Cancio added.

Agriculture and fisheries are also seen likely to continue to grow within the near term if the third-quarter momentum in the crops, livestock and poultry is maintained.

The NEDA official said the manufacturing sector is expected to benefit from the strategic localization of industry roadmaps and robust domestic demand and will also benefit from the projected rise of imports of both advanced economies and emerging market and developing economies beginning 2017.

“Construction also will remain a major contributor to growth due to the strong commitment of the government to implement a massive infrastructure investment program,” he added.

Downside risks

Although optimistic, the NEDA said the government is still on guard against possible downside risks to the economy. Some of the risks mentioned were: agriculture and fisheries remaining vulnerable to the possible occurrence of La Niña; a clouded outlook for exports due to sluggish recovery in Europe and uncertainties on economic policies in the UK and the US; resurgence in the Arab region of the “Saudization” policy, or the replacement of foreign workers with Saudi nationals; and the need to consolidate efforts that will pave the way for lasting peace and development in the countryside.

“Ultimately, what we should be concerned about is how the growth prospects for this year and beyond will translate to poverty reduction and improvements in the quality of life for Filipinos for the next six years,” Cancio said.

“We are hopeful that the trajectory of our country’s growth will remain high in the face of the challenges ahead of us,” he added. – Manila Times

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HSBC Raises Philippines Forecasts 3x from 6.3%  6.5%  to 6.8% in Q3 as GDP Swells

HSBC Bank plc  one of the largest banking and financial services organizations in the world. Photo: eia-international.org

HSBC raises 2016 PHL growth forecast to 6.8% as GDP swells

Read: HSBC Upgraded Philippine Economic Growth Forecast 6.3 - 6.5 Percent in October last Month

The Hongkong and Shanghai Banking Corp. (HSBC) has raised its Philippine growth forecast for the full year 2016 as the country exceeded expectations about the third quarter gross domestic product (GDP) results.

The global banking giant revised its growth forecast for the year to 6.8 percent from 6.5 percent this year, according to a report penned by HSBC economist Joseph Incalcatera.

As measured by the GDP, the economy grew by 7.1 percent in the third quarter of the year, the fastest among major Asian emerging markets, and beating median expectation at 6.8 percent.

Growth story intact

In the next two years, HSBC placed the GDP to grow by 6.5 percent citing the high base of 2016.

"The growth data show that the Philippine growth story remained intact in the third quarter," Incalcatera said.

"The 7.1 percent year-on-year expansion in the third quarter is Asia's strongest Q3 print to-date, and points to the resilience of the Philippine economy in a soft global growth environment," he added.

The HSBC economist noted the government is tracking well within its 6 to 7 percent full-year target as the economy expanded by 7 percent during the first nine months.

Asian Institute of Management economist Emmanuel Leyco is forecasting a higher trajectory for the whole of 2016.

"I think it would be more like 6.9 percent assuming that the last quarter would remain on the high spectrum," Leyco said on Friday.

In the HSBC report, Incalcatera took note the election of Donald Trump as President of the United States introduces some risks to growth due to the likelihood of protectionist policies.

"But we believe risks to the Philippines are manageable and more limited than elsewhere. The biggest risk comes from the BPO (business process outsourcing) sector, which employs approximately 1.2 million Filipinos and earns roughly 70 percent of revenues from the US," he said.

Leyco earlier noted the BPO industry might suffer economic headwinds from a Trump presidency if he starts taking steps to fulfill his campaign pronouncement of imposing taxes on US companies that outsource jobs abroad.

Incalcatera, however, said the risks may be mitigated because there is little direct competition with American workers and President Rodrigo Duterte appears to have struck a more conciliatory tone concerning future cooperation with the US. — VDS, GMA News

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Philippines Post Among Strongest Economic Growth in the world at 7.1% - Duterte Govt, Lauded

Philippines Posts Strongest Economic Growth in Asia at 7.1%

The Philippine economy grew at its fastest pace in three years last quarter, underscoring the nation’s resilience to global risks as investment surged and consumers spent more. Stocks gained.

Key Points

Gross domestic product increased 7.1 percent from a year earlier, the Philippine Statistics Authority said in Manila Thursday. The median estimate of 15 economists surveyed by Bloomberg was 6.7 percent

Compared with the previous quarter, GDP rose 1.2 percent, in line with economists’ estimates

Undeterred by risks such as Donald Trump’s protectionist ambitions and President Rodrigo Duterte’s rants against the U.S., the Philippine economy is set to expand more than 6 percent until 2018 to rank among the fastest-growing in the world, according to economists surveyed by Bloomberg. Last quarter’s growth exceeded China’s 6.7 percent and Vietnam’s 6.4 percent in the same period. India, which posted growth of 7.1 percent in the second quarter, is yet to publish GDP data for the three months through September.

Gifted with a young population and backed by $50 billion of revenue from remittances and outsourcing, the Philippines is getting an additional boost from Duterte’s $160 billion-infrastructure plan aimed at creating jobs. Projects include at least $1 billion of contracts to build an airport and a railway to transform a former U.S. military base into a commercial hub.

Markets

Philippine stocks rose a second day, climbing as much as 2.2 percent. They were up 1.1 percent as of 11:01 a.m. in Manila.

The peso was little changed at 49.32 per dollar.

Analyst Takeaways

“Philippines will remain an outperformer in the region,” said Rahul Bajoria, a senior economist at Barclays Plc in Singapore. “It is domestically driven, with consumption holding up quite well and the fiscal spending being planned. The global risks we’re seeing including to trade won’t fundamentally alter its prospects.”

“In the short term at least, we expect the economy will continue growing at a decent pace,” Gareth Leather, senior Asia economist at Capital Economics Ltd. in London, said in a note. “The foundations are in place for growth to remain strong, but recent political events, both in the US and domestically, have made the outlook much less certain.”

“Putting money on infrastructure-related stocks is the smart bet and it’s exactly what I am doing,” said John Padilla, who helps manage about $9.1 billion at Metropolitan Bank & Trust Co., the Philippines third-largest money manager. “This growth poses now more challenge for President Duterte to keep the pace. It supports the view that Philippines needs infrastructure to sustain this growth."

Duterte gov’t lauded; early economic momentum cited

Construction and infrastructure are among the sectors that help the country register a 7.1 percent gross domestic product (GDP) in the July to September period (CDN FILE PHOTO).

Business leaders in Cebu lauded the present administration for the 7.1-percent growth of the Philippine economy during the first three months of President Rodrigo Duterte in office.

However, some said this could also be owed to the momentum gained as early as the start of the year, where the economy expanded by 6.9 percent in the first quarter.

“This is an excellent result for the Philippines and definitely the current administration deserves some credit, although I suspect that most of this growth was pushed by the momentum of the Philippine economy,” Cebu Business Club president Gordon Alan Joseph told Cebu Daily News in a text message.

For Joseph, it takes more than three months for real reform to take place, although he admitted that the country is on the right track given the soundness of President Duterte’s socioeconomic agenda.

According to the Philippine Statistics Authority (PSA) on Thursday, the country’s Gross Domestic Product (GDP) growth at 7.1 percent during July to September period was faster than the 7-percent expansion in the second quarter this year and the 6.2-percent growth during the third quarter of 2015.

Economic Planning Undersecretary Rosemarie Edillon, in a statement, said this exceeded the consensus forecast of 6.8 percent and was even faster than China’s 6.7 percent, beating other major emerging economies for the same period as well.

This development came at the wake of unease among some foreign investors over his controversial crackdown on drugs and proposed changes in foreign policy.

Edillon cited strong investment growth, particularly in construction and infrastructure, along with upbeat consumer spending, encouraged by low inflation and low interest rates, as among the major drivers of this expansion.

Exports up

Exports finally picked up to grow at 7.8 percent, after seeing a decline in demand within the global market for 17 straight months.

Federico Escalona, executive director of the Philippine Exporters Confederation (Philexport) in Cebu, said exports usually increase toward the end of the year since this is usually when overseas workers and immigrants send remittances back to the country.

Among the gainers in the export sector are electronics, logging a 66-percent growth during the period in review, as well as metals and clothing. Losers, meanwhile, included food crop, transport machinery, and furniture.

Escalona said the 7.1-percent GDP growth is impressive, but Duterte needs to be in office for at least 12 months before the effects of his pronouncements can be felt.

Nowhere to go but up

For Cebuano economist Ferry Fajardo, there’s nowhere the Philippines can go but up at this point.

“It’s really the momentum,” he said, explaining that the country’s economy will grow even more until it reaches a certain point or a “wall” which he said isn’t present at the moment.

He added that many of the economic policies put in place during past administrations are still being implemented by the present administration.

Fajardo said it’s easier for the Philippines to grow at such a fast rate, especially when it started with a low base.

China, for example, grew 8 to 10 percent in the first few years after it opened its economy to the world some 30 years ago.

He said many were worried about the changes in policy especially with the rhetoric of the President, but it was just that — rhetoric.

However, he cautioned that the government should be careful in making statements that will affect the perception of foreign investors as investments are highly dependent on perception.

He said investors need to know that two or three years from now, something good will come out of their investments in the Philippines today.

Cebu Chamber of Commerce and Industry (CCCI) president Melanie Ng, for her part, said this reinforces the fact that the Philippines is indeed the fastest-growing economy in Asia.

“This latest result further supports the attractiveness of our country as an investment economic destination especially with the investment pledges received from China, Japan and Malaysia recently,” she said.

Ng added that the growth in export will greatly impact the overall economic supply chain in the country and will benefit the micro, small, and medium-scale enterprises (MSMEs) in the supply chain as well.

Glenn Soco, Mandaue Chamber of Commerce and Industry president, agreed this showed that the Philippines is on the right track.

“Our economy would only get better as the present administration’s economic agenda is just starting to kick-off,” he said.

The government targets a conservative 6-7 percent GDP growth in 2016 and will need to expand by 6.9 percent in the last three months of the year to hit the top end of its target.

Other Details

Household spending, which makes up about 70 percent of GDP, rose 7.3 percent from a year earlier

Government spending gained 3.1 percent

Investment surged 20 percent

With reports from : Bloomberg And Cebu Daily News

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