Gov't upbeat but analysts see slower PH growth in 2013

by Kathleen A. Martin,

Posted at Jan 31 2013 04:13 PM | Updated as of Feb 01 2013 11:22 PM

MANILA, Philippines - Economic managers were upbeat on the country's growth prospects this year, after gross domestic product growth accelerated to 6.6% in 2012.

But analysts said that while economic growth is expected to remain strong this year, it may not be as high as what the country saw last year.

"Last year’s growth ushers us into a very upbeat 2013, and we are determined to sustain—perhaps even exceed—the progress we’ve so far made, so that the benefits of good governance will manifest in direct, immediate, and sustainable benefits for all Filipinos," Budget Secretary Florencio B. Abad said in a statement on Thursday.

"More than ever, we are in an excellent position to deliver swifter, high-impact expenditures in 2013, particularly in view of budget reforms designed to accelerate disbursements further and ensure better service delivery to the public," he continued.

The Philippines expanded by 6.8% in the fourth quarter of 2012, bringing full-year growth to 6.6%. The 2012 growth figure breached government's 5% to 6% target and surpassed market expectations.

Finance Secretary Cesar V. Purisima, in a separate statement, noted this year will be all about sustaining that growth momentum achieved in 2012.

"Many good projects, programs, and policies have already been started and put in place. For 2013, we will focus on accelerating their implementation to ensure that we sustain the growth momentum," Purisima said.

"We are committed to strengthen our fiscal position, intensify our investments in infrastructure and in our people, and enhance our business environment. With the help of the private sector, we hope to do as well in 2013," he added.

For Bangko Sentral ng Pilipinas Governor Amando M. Tetangco, Jr., last year's GDP growth is a testament that monetary policy remains appropriate "for now."

"Our recent calculations show that the country's potential output has also been expanding in line with improvements in capital formation and levels of employment," he said in a text message to reporters on Thursday.

"This gives us more degrees of freedom to adjust our market operations and institute other macroprudential tools as appropriate to ensure that volatilities in financial markets do not translate into excesses in other sectors of the economy," he continued.

Policy rates are currently at record low of 3.5% for overnight borrowing and 5.5% for overnight lending.

But analysts yesterday said 2013 GDP growth will not be as high last year although it will remain strong and close to or within the government's 6% to 7% target.

Prakriti Sofat, regional economist at Barclays, said this year's growth may slow down to 5.9% despite the election-related spending expected to give a push to the economy.

"We recently revised up our 2013 GDP growth forecast to 5.9% given an expected election-related boost to growth 1-2 quarters before ballots and a gradual improvement in external demand," Sofat said in a reserach note.

"Given relatively robust domestic demand and rising inflationary risks we expect the BSP to keep the policy rate unchanged at 3.5% well into this year, though we also expect it to start withdrawing monetary stimulus in Q4 (fourth quarter) with a 25bp (basis-point) hike," she added.

The research arm of Metropolitan Bank and Trust Co., meanwhile, sees a higher 2013 GDP for the Philippines at 6%.

"The Philippine economy is indeed on the road to a higher growth trajectory, surprising markets with remarkable expansions in 2012... Research sees full-year 2013 GDP growth to remain strong, albeit slightly lower than in 2012 on base effects, at 6%," read a separate research note.

Metrobank's Research said domestic consumption will remain as the primary growth driver this year, as remittances will remain robust amid a well-anchored inflation rate.

The services sector is also expected to provide a boost to the economy due to growth from the real estate and tourism sectors, it added.

Moreover, government spending and the roll-out of public-private partnership projects are expected to contribute to this year's growth.

Luz L. Lorenzo, Senior Vice President and Group Economist at Maybank ATR KimEng, concurred with Metrobank, saying domestic consumption, along with public spending, will drive growth this year.

"Sources of growth for this year and the coming years will be private consumption and government spending," Lorenzo told ANC's News Now.

"with the GDP numbers that we saw today, a big boost came from government spending and that should be a hint that going forward, that should continue," she stressed.

Private consumption, meanwhile, is seen to be sustainble given the "favorable" macroeconomic conditions in the country at present.

But Lorenzo pointed out the Philippines will have to attract more investments if it wants to accelerate its growth further.

"Investments... should move higher, this is the key to ramping up growth in the future," she said.

In addition, she also noted that growth should not come only from a number of sectors but should be broad-based.

Lorenzo said the agriculture, manufacturing and industrial sectors are not growing as fast as the services sector.