WITH inflation as the only downside among all major indicators, a think tank said the Philippine economy is a cinch to sustain its above 6.5-percent growth in the first quarter.
“The investment-led growth of the economy appears intact in the first quarter, as robust national government spending and manufacturing-output gains last December should spill over into higher employment and consumption spending in the first quarter,” the First Metro Investment Corp.-University of Asia and the Pacific (FMIC-UA&P) Capital Markets Research noted in its latest Market Call report.
The think tank said all growth indicators are positive for the Philippines, except inflation. In February inflation accelerated to 3.3 percent, the fastest in 27 months. Average inflation in the first two months was at 3 percent.
But the FMIC-UA&P Capital Markets Research said inflation is bound to “stabilize just above” 3 percent this year.
The group said there is a limit to the increase in crude-oil prices and the inflow of increased rice imports will help slowdown price increases throughout the year. “Besides, the move of exports into positive territory in three of the last four months should provide further impetus to the strong domestic demand outlook.” Though the country’s exports may have ended sourly in 2016, the think tank expects export performance to improve this year.
This will largely be supported by the gains in the manufacturing sector in the last quarter of 2016. Last December the Volume of Production Index saw a 23-percent growth. Among the sectors that posted over 35-percent growth were petroleum products, at 63.2 percent; fabricated metal products, 41.5 percent; and food manufacturing, 35.1 percent.
“With particularly robust manufacturing-output gains in the last two months of 2016, capital goods imports should continue to post above 20-percent gain in the first quarter. We have obtained empirical evidence that manufacturing volume leads investment spending,” the think tank said. In January the Philippine Statistics Authority (PSA) announced that the economy grew 6.8 percent in full-year 2016 and 6.6 percent in the fourth quarter.
Despite posting its slowest quarterly growth in the fourth quarter, the National Economic and Development Authority said the Philippines is still among the fastest-growing economies in Asia.
Meanwhile, the Philippines saw the largest quarter-on-quarter decline in local currency (LCY) bond issuances in the fourth quarter of 2016, according to the latest Asian Development Bank (ADB) report.
In ADB’s Asian Bond Monitor, the Manila-based multilateral development bank said the country’s LCY bond issuances reached only $4 billion, a 44-percent decline.
“This was partly the result of a high base in the third quarter of 2016, when the government of the Philippines issued P100 billion worth of retail Treasury bonds,” the report stated. “The Bureau of the Treasury also rejected or only partially awarded most of its scheduled auctions of Treasury bills and bonds in the fourth quarter of 2016, as market participants sought higher yields given uncertainty in the market,” it added.
The decline in the country’s LCY bond issuances mirrored the trend for all emerging countries, which saw a 14.8-percent drop quarter-on-quarter to $946 billion in the last quarter of last year.
However, on a year-on-year basis, the country’s total LCY bond issuances grew 22.8 percent on the back of corporate bond issuances.
“Bonds issued by Philippine corporates rose 60.3 percent quarter-on-quarter in the fourth quarter of 2016, as they opted to increase borrowing in anticipation of higher interest rates,” the report stated.