PHILIPPINE economic growth is not expected to slow—unless inflation breaches 4 percent—even after the elections this year because of the momentum provided by the substantial jobs creation in December, according to First Metro Investment Corp.-University of Asia and the Pacific (FMIC-UA&P) Capital Markets Research.
In its latest Market Call report, the local think tank said even with the expected slowdown of consumption after the elections, the economy is still poised to register a growth of 6 to 7 percent this year, faster than the 5.6 percent posted last year.
However, FMIC-UA&P Capital Markets Research said inflation of above 4 percent fueled by high oil prices could prevent the government from attaining its growth targets this year.
“Should crude oil prices remain longer at elevated levels, as the Organization of the Petroleum Exporting Countries [OPEC] maintained their monthly output reduction of 400,000 barrels/day levels, these may challenge our safe 3.7-percent full-year inflation forecast,” the think tank said. “A return to above-4 percent inflation, however, could keep growth below government target.”
The primary driver of the economy, especially in the first quarter of the year, are the 797,000 jobs in December which brought the total fourth-quarter gain in jobs to 2.7 million.
The jobs created in the last quarter of the year, the think tank said, was the main factor behind the 7.7-percent growth in GDP. This has also helped increase total employment to 46.3 million.
This is the reason FMIC-UA&P Capital Markets Research said the Omicron variant of Covid-19 will not be able to dampen the country’s growth prospects. The think tank said growth will still be robust even if there was a surge in Covid-19 cases in January.
“We do not think that the spike in Covid-19 Omicron variant cases, and corresponding stricter lockdown for three weeks in January would prove sufficient to retard the growth momentum established in the second half of 2021,” the think tank said.
“We have observed lax enforcement of the lockdowns after a few days, and firms seemed less fazed by the renewed restrictions. Besides, the scientific evidence appears that the Omicron variant, while more contagious, appears much less lethal, and less demanding on hospital services,” it added.
FMIC-UA&P Capital Markets Research also believes the elections will not be a factor in slowing the government’s big-ticket projects. In fact, the think tank believed construction will re-emerge as a key growth driver for the economy.
It also said the manufacturing sector will likely continue to grow in the first semester of the year, despite the usual slowdown in January after the Christmas holidays.
Further, the think tank said, the passage of the amendments to the definition of public utilities and the lowering of the investment required for retail firms could increase foreign investments in the country this year.