MANILA, Philippines - The Philippines is in better shape to withstand the current round of international financial turbulence and a weaker trend in the world economy mainly on the strength of its manufacturing and consumer sectors as well as higher government spending particularly on infrastructure, said First Metro Investment Corp. and the University of Asia & Pacific (UAP).
In a briefing yesterday, FMIC president Roberto Juanchito Dispo said they are maintaining their bullish outlook for the Philippine economy, which is forecast to rise 7-7.5 percent this year or higher than the Asian Development Bank and World Bank’s projection of six percent and 6.2 percent, respectively.
Dispo said manufacturing is still the largest sector of the economy at 21 percent of gross domestic product (GDP). Export earnings are also expected to contribute to the country’s economic expansion, growing 6-8 percent by yearend.
UAP economist Victor Abola said the local economy is undoubtedly growing with some sectors taking off, driven by robust domestic consumption.
The Philippines posted surprisingly strong growth in the first quarter with GDP rising 7.8 percent, the fastest pace in almost three years. Last quarter’s growth was the fastest among 11 Asian economies, eclipsing China’s 7.7 percent annual pace.
“The GDP growth is sustainable and not a fluke. We’re really taking off with robust domestic demand propelling the country’s growth,†Abola said.
While consumer spending slowed in the first half, Ebola said it would grow at a faster clip in the second semester due to the peso’s depreciation and steady remittance inflows from overseas workers as well as stable export growth.
OFW remittances will remain resilient at 4-5 percent as the 10 million OFWS continue to send money home. The Philippines is currently the third largest recipient of remittances in the world after India and China.
Investment spending is forecast to grow 19 percent in the second semester, largely driven by durable equipment (including power projects, chemicals and electronics and mining) and private and public construction.
Abola expects the construction of more residential projects, hotels and tourism facilities to drive private construction spending.
The local economy’s growth is also driven by a booming BPO (business process outsourcing) sector, which is projected to grow 15-20 percent over the next five years.
Aside from all these positive developments, the Philippines continues to attract a significant number of tourists, with arrivals hitting 1.6 million in January to April 2013 or an increase of 10.12 percent from the previous year. This despite the ongoing conflict between the country and China, Abola said.
FMIC also sees inflation easing to an average of 2.8 percent by the end of the year amid ample food supply and stable oil prices due to the drilling boom in the shale gas regions in the US and Russia. Oil price is forecast at $94 per barrel.
As for the peso, the downward trend is expected to continue, hovering at 41-43 to a dollar, which is seen to boost the competitiveness of local producers and BPOs while adding to the purchasing power of OFW families.
FMIC said the growth is seen powering on after the country obtained an investment grade rating from Standard & Poor’s, the second debt agency to do so this year. That would result in lower borrowing costs and help the Philippines, mired with high unemployment and poverty, to attract more foreign funds.