MANILA, Philippines – First Metro Investment Corporation (FMIC), the investment banking arm of the Metrobank Group, said the Philippine economy is expected to continue its strong performance in 2014.
FMIC forecasts a 7 to 7 percent growth in the country’s gross domestic product (GDP), well within the government’s growth target of 6.5 to 7.5 percent.
"The country has shown resilience, we are still the best performing economy in ASEAN with a 7.4 percent GDP growth in the first nine months of 2013. Our fundamentals remain intact and will be able to withstand volatilities in 2014, be it domestic or global," FMIC chairman Francisco Sebastian said in a briefing on Monday.
FMIC chairman Francisco Sebastian at Philippines 2014: Resiliency Amidst Uncertainty
Economist Dr. Victor Abola said the reconstruction and rehabilitation efforts in areas affected by typhoon “Yolanda” in November 2013 will be one of the drivers in the economy’s growth.
The government is spending an estimated P361 billion until 2016 for the rehabilitation work, P100 billion of which will be spent in 2014.
Abola said from the total estimated budget, P163.8 billion will come from peso loans, which he said is still within the country’s budget. The P60 billion will come from aid while the remaining P112.5 billion will come from foreign loans.
Abola said the forecast is attainable despite a possible 2 percent drop in the agricultural sector due to last year’s calamities.
He added that the recovery of US and Japan, and soft crude prices in Iran, US and China may boost the economy.
Abola warned, however, that a delay in the rehabilitation of Yolanda-affected areas will adversely affect the growth forecast.
“It’s a risk in terms of reaching the 7 and 7.5 percent. If we don’t go fast enough, we will go below the 7 percent. It will pull down [growth] because it is a lot of spending from the national government and private sector. That’s a lot of rebuilding that has to be done,” he told ABS-CBNNews.com.
He added that the dispute on the power rate hike also poses as a risk to growth forecast if it is not resolved immediately.
“That has to be resolved right away because that gives the signal to the stability of our investment environment and it should not be settled on the basis of popular perceptions,” he said.
The Supreme Court issued a 60-day halt order on the P4.15 per kilowatt-hour increase by the Manila Electric Co. (Meralco) on December 23.
The TRO stopped both the Energy Regulatory Commission (ERC) and Meralco from implementing the power rate increase.
FMIC president Roberto Dispo, meanwhile, said the “pork barrel” scam is another risk factor that may affect economic growth in 2014.
Inflation, local currency
FMIC also expects inflation to remain manageable at 3.8 percent to 4 percent in 2014, which is within the Bangko Sentral ng Pilipinas’ target of 3 percent to 5 percent.
FMIC noted that while inflation is likely to continue its upward movement in the early part of 2014, it is anticipated to decelerate before the year ends.
Remittances from overseas Filipino workers (OFW) are also projected to increase 6 percent to 7 percent in 2014 as more OFWs are expected to send money to those affected by the typhoon.
The Philippine peso, meanwhile, is seen to average at 43 and 46 against the US dollar in 2014, while a 6 percent to 10 percent jump is seen at the country's exports due to US recovery and China's steady growth.
Imports, on the other hand, are projected to grow between 8 percent and 12 percent.