Philippine economy seen to grow 6.8% this year

MANILA, Philippines - The Philippine economy is expected to expand by 6.8 percent this year as the country reels from the disaster wrought by typhoon Haiyan (Yolanda), the Institute of Chartered Accountants in England and Wales (ICAEW) said in its quarterly South East Asia Economic Insight.

ICAEW said 2014 will see stronger growth in investment and government spending in the Philippines as the developing nation recovers from the devastation wrought by typhoon Haiyan. The organization expects the country's gross domestic product (GDP) to expand by 5.3 percent in 2015 and 5 percent in 2016.

"The devastation wrought by typhoon Haiyan destroyed rice and sugar crops,and damaged areas of farmland. This has resulted in a short-term drag on food production as the agriculture industry recovers from its recent turmoil. However, a faster recovery in the nation’s fishing industry should help mitigate the damaging economic consequences. Overall, annual food price inflation is expected to increase to approximately 4 percent in 2014, up from 2.8 percent in 2013, before falling to 3 percent in 2015 and 2016,” said Douglas McWilliams, ICAEW chief economist and executive chairman of Centre for Economics and Business Research Ltd.

ICAEW said growth in private consumption and net exports will be subdued this year, and overall growth will slow down next year as construction and rebuilding activity slow down. Lack of infrastructure development, high poverty levels and unemployment are also seen to hold back the country's economic performance.

In the Association of Southeast Asian Nations (ASEAN), ICAEW said food prices are likely to rise this year. For the Philippines, prices are expected to ease in the long-term following price shocks caused by typhoon Yolanda.

Demand for energy is also seen to rise in ASEAN, with economies growing more dependent on international energy markets to meet their needs. ICAEW added, however, that over the coming years, Malaysia and the Philippines will see a small reduction in their reliance on external energy producers for the motor and aviation fuel that they require.

ASEAN countries are also seen to focus on minimizing government spending to manage debt level and boost investor confidence in the region.

"In the Philippines, government spending is expected to increase as the authorities provide recovery and rebuilding assistance to those regions and people affected by last year’s typhoon. Although this will be mitigated to an extent by a higher tax take from the construction sector, the overall impact will be to increase the government deficit as a proportion of gross domestic product," the organization said.