MANILA: Growth in the Philippine economy picked up late in 2015 as strong domestic demand and government spending cushioned the impact of weak exports which are hurting many of its larger, trade-reliant Asian neighbors. Even the severe El Nino dry spell, which hit farm output, failed to dampen the country’s momentum much.
Southeast Asia’s fifth-largest economy grew 6.3 percent in the fourth quarter from a year earlier, faster than the 5.9 percent economists had predicted and picking up from a revised 6.1 percent in the third quarter. That brought full-year growth to 5.8 percent, national statistician Lisa Grace Bersales told a news conference, which could mark one of the strongest expansions in the world in turbulent 2015. China has reported 2015 growth of 6.9 percent and Vietnam 6.7 percent.
On a quarterly basis, the economy once known as “the sick man of Asia” grew 2.0 percent in the fourth quarter from the previous three months, slightly less than markets had expected but eclipsing China’s 1.6 percent. “The Philippines is not as heavily leveraged to external growth as some other countries in the region, and domestic demand, predominantly government spending and investment spending, is what really pushed up the growth numbers in the fourth quarter,” said Rahul Bajoria, regional economist at Barclays Bank in Singapore.
“This momentum should generally be sustained. We are expecting growth to be around 5.5 percent in 2016, slightly lower but broadly still in a very comfortable position.” The resilient performance appeared to support the central bank’s conviction that the economy does not need additional stimulus at the moment. Main growth drivers in the fourth quarter were services, where growth accelerated to 7.4 percent on-year, and government spending, which surged 17.4 percent. Consumption also grew at its fastest annual rate in at least two years at 6.4 percent.
BRIGHT OUTLOOK
“We remain bullish. We are maintaining our expansion plans, opening new supermarkets, expanding our convenience stores and putting up new malls,” said Leonardo Dayao, president of Cosco Capital, the parent firm of the Philippines’ second largest supermarket chain Puregold.
Nearly $40 billion worth of inflows from business outsourcing contracts and millions of Filipinos working overseas flood into the Philippines every year, lifting incomes and spurring demand for property, cars, consumer goods and services.
“We continue to see no need to adjust policy settings at the moment, given the healthy Q4 GDP…and an inflation outlook of a slow creep to within target over the policy horizon,” Bangko Sentral ng Pilipinas Governor Amando Tetangco said.
But in a sign that the consumption-led economy is not totally immune to the slowdown in China, economic planning secretary Arsenio Balisacan said the Philippines would likely miss the top end of its 7-8 percent target for 2016. Philippine exports were down 5.8 percent in the 11 months to November last year due to sluggish demand from top trading partners Japan, United States and China.
Growth also should be boosted this year from campaign spending ahead of presidential elections in early May, though investors are likely to be cautious until the new leader’s policies are clear.
Under outgoing President Benigno Aquino, the economy grew an average of 6.3 percent annually, helping cut the once stubbornly high jobless rate to a record low of 5.6 percent. His efforts to collect more revenue by intensifying a campaign against tax evasion, as well as prioritising infrastructure, helped win the country investment grade ratings from major credit agencies.
