A group of economists from First Metro Investment Corp. and University of Asia & the Pacific said the gross domestic product will likely expand more than 6.5 percent year-on-year in the first quarter, on higher government expenditures.
“Despite a high base in the first quarter of 2016, we think GDP growth in the first quarter of 2017 will exceed 6.5 percent as all indicators, except faster inflation, signal sturdy output expansion in the current quarters,” the economist said in the March issue of their Market Call capital markets research.
“As major PPP [public-private partnership] projects have commenced work and government-funded infrastructure spending rides high, the boost in construction activity should show consolidation of economic strength,” the private economists said.
The report said that 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,” they said.
Latest data from the Philippine Statistics Authority showed the manufacturing sector sustained growth in January 2017 as the volume of production index expanded 9.3 percent, although this was slower than the 35.8-percent increase a year ago.
The National Economic and Development Authority said the increased production of basic metals, transport equipment, petroleum products and food manufactures continued to drive manufacturing output in January.
Economic Planning Secretary Ernesto Pernia said the outlook of industry firms in the first quarter of 2017 remained optimistic as business expansion, higher energy sales and implementation of construction projects were anticipated.
The private economists said that with bloated domestic demand and exports gaining lost ground, the first-quarter performance should again signal much vigor in the economy.
FMIC and UA&P economists also expressed optimism that while inflation breached the 3-percent level in February, consumer prices would stabilize in the coming months, as crude oil prices showed limited upside and food price inflation could slow down with the inflow of more rice imports.
Inflation in the first two months of 2017 averaged 3 percent, the mid-point of the government’s target range of 2 percent to 4 percent this year.
GDP grew 6.8 percent in the first quarter of 2016, driven by election-related spending, robust domestic demand and investment. Full-year growth in 2016 hit 6.8 percent, near the upper bound of the Duterte administration’s revised target range of 6 percent to 7 percent.
The government expects GDP to grow 6.5 percent to 7.5 percent this year. For 2018 and 2019, the inter-agency Development Budget Coordination Committee set the growth target at 7 percent to 8 percent.
The International Monetary Fund said the economic outlook for the Philippines this year remained favorable but would be challenged by external headwinds particularly the sluggish regional growth and the impact of US monetary policy tightening.
An IMF mission visited Manila on Feb. 20 to 24 to assess recent economic developments. The mission met with Bangko Sentral ng Pilipinas Governor Amando Tetangco Jr., the secretaries of the economic cluster, senior government officials, private sector representatives and the financial community.
“The economic outlook continues to be favorable, although subject to external headwinds. In 2017, growth is projected at 6.8 percent on continued strong domestic demand and a mild export recovery,” the IMF mission said in a statement.