Growth to slow down this year

MANILA, Philippines - Philippine economic growth is seen slowing to 6.8 percent this year from a stellar 7.2 percent in 2013 on muted prospects for exports and domestic consumption, a foreign auditing group said.

“Overall, the Philippine economy will grow by 6.8 percent in 2014,” the Institute of Chartered Accountants in England and Wales (ICAEW) said in a report.

ICAEW’s forecast is within the government’s 6.5 to 7.5 percent target range for this year. However, this is slower than the 7.2 percent expansion recorded in 2013.

The group explained that the main drivers for a still-robust growth this year will be the rebuilding efforts being undertaken by the government following the destruction experienced after Super Typhoon Yolanda (international name: Haiyan) hit the Visayas in November last year.

“This year will see stronger growth in investment and government spending in the Philippines as the developing nation recovers from the devastation wrought by Typhoon Haiyan,” ICAEW added.

The government in December said it plans to spend P360.8 billion over three years for rehabilitation and rebuilding efforts following the destructive typhoon.

“Government spending in the Philippines will increase as the authorities provide recovery and rebuilding assistance to those regions and people affected by last year’s typhoon,” ICAEW added.

“Although this will be mitigated to an extent by a higher tax take from the construction sector, the overall impact will lead to an increase in the government deficit as a proportion of GDP (gross domestic product),” the group continued.

But the slower GDP growth will be on the back of an expected deceleration in domestic consumption, which is the main driver the economy.

“Growth in private consumption and net exports, however, will be subdued,” ICAEW said.

The group further sees Philippine economic growth slowing in 2015 and 2016, far below the 7.2 percent achieved last year and the 6.8 percent hit in 2012.

“This will slow in the coming years as the same construction and rebuilding activity that raised GDP growth in 2014 eases back,” ICAEW said.

“At the same time, the lack of infrastructure development, high poverty levels and unemployment will hold back performance,” the group added.

“We expect GDP to increase by 5.3 percent and five percent in 2015 and 2016, respectively,” ICAEW further said.

The government hopes to grow the economy by seven to eight percent in 2015 and by 7.5 to 8.5 percent in 2016.

The Aquino administration has been aggressively putting in place reforms and ending corruption to attract more investments and spur economic growth.