THE performance of our country’s economy in the third quarter, which exceeded expectations, effectively confirmed the sustainability of strong growth this year, which is unusual for a post election year. GDP grew by 6.9 percent in the July-to-September quarter, which drove growth in the first nine months of 2017 to 6.7 percent, already above the lower end of the full-year target range of 6.5 percent to 7.5 percent.
The impressive performance, which also strengthened the Philippines’s position as one of the fastest-growing economies in Asia, prompted the National Economic and Development Authority (Neda) to project the same, if not better, result in the fourth quarter.
The third-quarter performance also paved the way for a flurry of positive developments for the economy. Last month, S&P Global Ratings raised its GDP growth forecast for the Philippines to 6.6 percent for this year, or a notch above the lower end of the government target, from 6.4 percent, which was below the official goal.
The ratings firm cited strong domestic consumption and higher electronics exports as the main factors that will boost GDP growth. Other ratings agencies and investment banks made similar upward adjustments in their full-year forecasts following the release of the third-quarter results.
The International Monetary Fund (IMF) said the country continues to enjoy investor confidence, which should boost growth prospects. According to its World Economic Outlook, the IMF expects GDP to grow by 6.6 percent this year.
The bright outlook is supported by strong macroeconomic fundamentals and policy buffers, including a low level of public debt and a high level of international reserves.
The government’s ongoing efforts on tax reforms would also support growth over the medium term.
Two surveys conducted recently by the Bangko Sentral ng Pilipinas (BSP) found optimism among both consumers and the business sector.
Based on the BSP’s consumer-confidence survey, consumer outlook was broadly steady for the fourth quarter of 2017, with the overall confidence index (CI) at 9.5 percent, just slightly lower than the 10.2 percent posted in the third quarter.
This means that optimists continue to outnumber pessimists.
Respondents indicated that their continued positive sentiment during the current quarter was on account of additional family income and higher salary, and availability of more jobs leading to an increase in the number of employed family members.
In a separate survey conducted from October 2 to November 20 with 1,473 respondents, the BSP said businesses, particularly exporters, turned more optimistic in the fourth quarter as a result of the moderate and gradual weakening of the peso against the dollar.
The overall business confidence index of the Business Expectation Survey rose to 43.3 percent in the fourth quarter from 37.9 percent in the preceding quarter.
BSP Deputy Governor Diwa C. Guinigundo said the overall business CI of the Business Expectation Survey improved to 43.3 percent in the fourth quarter from the previous quarter’s 37.9 percent. It was the highest since the third quarter of last year, when the overall business CI stood at 45.4 percent.
The latest positive news for the economy was the decision by Fitch Ratings on December 11 to upgrade the Philippines’s long-term credit rating from “BBB-“ to “BBB” with a stable outlook.
The improved credit rating of the Philippines will enhance the government’s access to financing and potentially present more favorable terms and conditions for future loans.
Among the key ratings drivers cited by Fitch were the economy’s consistent growth performance and inflows of foreign direct investments (FDI), as well as the country’s robust fiscal position.
The ratings agency praised the government’s fiscal policies that are geared to boost infrastructure spending and liability management.
The tax-reform initiative, in particular, will generate revenues for the government to finance its expenditure priorities while also supporting the projected decline of the government debt as a percentage of GDP.
Inflows of FDI continue to improve. In September 2017 alone, net FDI inflows reached $754 million, about 61.8 percent higher than the $466 million posted in the same month last year.
This brought total net FDI inflows for the first nine months to $5.8 billion, a bit lower than the $5.9 billion registered a year ago.
Remittances from overseas Filipino workers continue to support their families and the domestic economy. For the first nine months of 2017, remittances coursed through banks stood at $20.8 billion, up 3.8 percent, from $20.02 billion in the same period last year.
All of these results take root from President Duterte’s initiatives on the major issues he faced at the beginning of his term: foreign policy, drug problem, peace and order problem, the communist insurgency and the Muslim secessionist movement.
Investors see a more stable country now because the President really hit the ground running.
All told, and while we wait for the official report on the economy for the whole year, I am confident that we will end 2017 on a very positive note. So far, so good.
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