GDP forecast to grow 6.9% this year

MANILA, Philippines -  The momentum of the country’s economic expansion would be sustained this year,  ANZ Bank said, with gross domestic product (GDP) growth accelerating further to 6.9 percent amid the ramp-up in infrastructure spending by the Duterte administration.

Eugenia Victorino, economist at ANZ Bank, said higher fiscal spending particularly for much needed infrastructure projects would boost the economy.

“Looking ahead, we expect 2017 GDP growth to rise to 6.9 percent on the back of increased fiscal spending. The Duterte administration’s renewed push for infrastructure is aimed at diversifying economic development away from the National Capital Region,” she said.

Economic managers raised the budget deficit ceiling to three percent of GDP instead of two percent as it intends to ramp up infrastructure spending to five percent of the economy’s output.

“However, such investment would require sustained strong growth in capital imports. Hence, we see rising risks that the goods trade deficit could balance out remittance inflows,” she added.

She pointed out the outlook on the current account would now depend on the growth in services trade.

“Over the last few years, services trade has been posting surpluses of around one to 1.5 percent of GDP,” Victorino said.

The country’s GDP growth eased to 6.6 percent in the fourth quarter of last year from the revised seven percent in the third quarter due to the growth pullback in industrial activity in the two months to November.

The government also recently reported a contraction of farm output in the fourth quarter, in line with the contraction of 1.1 percent in agricultural production.

On the expenditure front, growth in household spending remained above trend at 6.3 percent. Total investment also delivered a strong number of 15 percent, having been aided by election-related spending all through 2016.

This brought the average GDP growth last year to 6.8 percent, well within the six to seven percent target set by economic managers.

For 2017, the Duterte administration penned a GDP growth target of between 6.5 and 7.5 percent.