Weaker power sales could stymie GDP growth – economists

MANILA, Philippines - Indicators of an economic slowdown such as lower power sales of Manila Electric Co. (Meralco),  could affect the bullish outlook for the Philippines this year, economists warned.

In the latest capital markets research by First Metro Investment Corp. (FMIC) of the Metrobank Group and the University of Asia and the Pacific (UA&P), it was noted that  “Meralco sales, which is used as proxy for gross domestic product (GDP), has sketched a downward trend--from 3.9 percent in January to a six-month low of 1.3 percent in February--implying that we may not be off to a good start.”

“The bullish outlook for the country’s GDP growth in Q1 may be held back for a moment as Meralco electricity sales volume, which is used as the GDP proxy, has sketched a downward trend,” the report said.

It noted that all three major sectors also mirrored the downward trend.

“Industrial sales slowed to 2.7 percent, reflecting the 31.5 percent decline in exports in February, although the volume of production index (VoPI) remained positive at 8.7 percent growth for the same month,” it said.

It also noted that commercial sales were only 2.1 percent higher than the previous year.

“Meanwhile, seasonal factors such as cold weather caused residential sales to suffer the most, slipping  1.4 percent year-on-year. While the figures confirmed the difficulty to match the Meralco electricity sales performance in 2012, the outlook for the country’s GDP growth for Q1 is still likely to hit over six percent, while for the rest of the year, seasonal factors (i.e. summer season and start of school year) and the long list of infrastructure projects will likely find its way to impact on the electricity sales in the remaining quarters,” it said.

The FMIC and UA&P report also warned of other factors which may indicate weak economic performance.

“Exports remained weak in January amid weak global demand,” it said.