7% full-year growth still likely despite slow start

THE country’s economy is still poised to expand by 7 percent this year, on the back of higher government spending and more foreign direct investment (FDI) inflows in the second half, according to a local think tank.

First Metro Investment Corp. (FMIC) and University of Asia and the Pacific’s (UA&P) Capital Markets Research said GDP growth in the first half would be higher, despite the relatively weak performance of the economy in the first quarter.

“The Philippine economy is expected to record a stronger growth in the first half and hit a 7-percent [or higher] full-year growth, as robust investment spending continues and foreign direct investments perk up,” the report, titled “The Market Call”, read.

The report noted that net FDI inflows in February stood at $366 million, higher by 7 percent over the same period last year.

Higher inflows in the first two months of 2017 resulted in a $1.1-billion take, marking an 11-percent gain from a year-ago

levels. This outlook is further propped up by continuous capital goods importation and manufacturing surge on the production side.

“Capital goods imports should resume its elevated growth path starting the second quarter, while the manufacturing sector maintains its pace of double-digit gains,” the report read.

“The two, underpinned by FDI and heavier infrastructure spending, should keep the shine on the country’s investment-led growth,” it added.

With capital goods imports increasing by 25 percent in March and industrial production
expanding in double digits in the same month, expectations are high public construction can again gain double-digit growth starting this second quarter.

Even with GDP growth in the first quarter falling below the government target of 6.5 percent to 7.5 percent due to the antimining initiatives of the Department of Environment and Natural Resources, the think tank said the economy will perform better in the second half.

In the first quarter of the year, the economy grew by 6.4 percent due to the perceived recalibration of government programs and the “changing of the guards”, according to National Economic and Development Authority Secretary Ernesto M. Pernia.