Economy grows 6.3% in 4th quarter, 5.8% in 2015

MANILA, Philippines – The economy grew at its fastest pace in the final quarter of 2015, pushing full-year growth to a “respectable” but lower-than-target rate of 5.8 percent.

The government’s full-year target is 7.0 percent to 8.0 percent.

In a press briefing yesterday, National Economic and Development Authority (NEDA) director general Arsenio Balisacan said economic output – as measured by the gross domestic product (GDP) – expanded by higher-than-expected 6.3 percent in the fourth quarter, boosted by increased government spending and strong domestic consumption.

“The 6.3-percent growth in the last quarter of 2015 affirms that the economy is indeed steadily traversing the higher growth path, building on the solid efforts by both public and private sectors,” he said.

Even the severe El Niño dry spell, which hit farm output, and the weakness in the country’s exports failed to significantly dampen the growth momentum, Balisacan added.

At Malacañang, presidential spokesman Edwin Lacierda said the “encouraging results are in line with the government’s commitment to growth that is both inclusive and sustainable.”

Balisacan said growth acceleration from the first quarter to the fourth has been very encouraging, bringing the average full-year growth to 5.8 percent.

“Though this is lower than what we targeted for the year, this growth is respectable given the difficult external environment, the onset of El Niño, and the challenges in government spending in the first semester.”

For 2015, among the major developing countries, the Philippines is likely to settle among the fastest in Asia, next to India, China and Vietnam, Balisacan noted.

“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,” Rahul Bajoria, regional economist at Barclays Bank in Singapore, said.

“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 latest results 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, the growth of which accelerated to 7.4 percent on-year; and government spending, which surged 17.4 percent.

Consumption also grew 6.4 percent, its fastest annual growth in at least two years.

“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, 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, US and China.

While growth may be boosted this year by campaign spending ahead of the presidential elections in early May, investors are likely to be cautious until the new leader’s policies are clear.

Under the outgoing Aquino administration, the economy grew by an average of 6.3 percent annually, leaving the once high jobless rate to a record low 5.6 percent.

The administration’s efforts to collect more revenue by intensifying a campaign against tax evasion, as well as prioritizing infrastructure, helped win the country investment grade ratings from major credit agencies.

‘Higher quality’

Lacierda said the six-year moving average of real GDP growth of 6.2 percent is the highest in 38 years since 1978.

The Palace official said growth in the 1970s during the Marcos regime was “debt-fueled” as against the one under the Aquino administration, which “is of higher quality, as it is supported by sound fundamentals and ongoing structural changes.”

In the ’60s and early ’70s, the Philippine economy was very stable and was second to Japan.

“In his last SONA, the President mentioned that from 2010 to 2014, the Philippines posted an average GDP rate of 6.2 percent, marking our fastest growth period in the past 40 years,” Lacierda said.

“Recent survey results affirm the positive changes that this growth has prompted in our bosses’ lives, with the number of Filipinos who consider themselves poor and experience involuntary hunger falling, and personal optimism rising to its highest level in 28 years,” he said.

“Indeed, this year has seen good news for the Philippines coming one after the other, boding well for the rest of 2016. Rest assured that the government will continue working to promote national progress alongside better services for our citizens,” Lacierda pointed out.

Apparently making a pitch for President Aquino’s preferred successor, Lacierda said they hope “voters will choose a leader who will keep to the ‘straight path’ – one who will build on our recent progress and further accelerate it.” Former interior chief Manuel Roxas II is the administration standard bearer in the May elections.

“As President Aquino said, so long as we continue along daang matuwid, we will be able to reach first world status within one generation – and thus improve not only our own lives but also those of our children and grandchildren,” the presidential spokesman pointed out.

Infra development pushed

Business groups are optimistic the country can sustain its strong economic growth this year, but only if the government would continue its push for infrastructure development.

“They have to make sure projects are finished on time,” Philippine Chamber of Commerce and Industry (PCCI) president George Barcelon said in a telephone interview, referring to public-private partnership projects.

He also said the government should also work on providing a conducive business environment as well as give greater support to small and medium enterprises.

Makati Business Club (MBC) executive director Peter Perfecto also voiced optimism, saying the services sector as well as consumer spending would be the main growth drivers.

He said the challenge to the current administration and to the next is to ensure that growth is more inclusive to benefit more sectors and households.

“This includes focusing on delivering needed infrastructure to boost productivity and connectivity, investing in our people through education and skills training, and strengthening support for livelihood and healthcare programs,” he said.

MBC also said the government should set in place reforms and work more vigorously for a corruption-free environment.

Henry Schumacher, vice president for external affairs at the European Chamber of Commerce of the Philippines said completion of projects to address the country’s infrastructure needs would support strong economic growth this year.

“We expect 2016 to do better as it is an election year and government will and must focus on infrastructure development,” he said.

JP Morgan chief Southeast Asian economist Sin Beng Ong said Philippine growth has bucked the regional trend since 2012.

“Both government consumption and fixed investment have come roaring back, and likely, reflects the better implementation of spending after the suspension of the Disbursement Acceleration Program (DAP) by the Supreme Court. Private consumption too firmed,” Ong said in a report.

But JP Morgan revised its 2016 growth outlook from 5.2 percent to 5.4.

“We have revised growth in 2016 up to 5.4 percent from the prior forecast of 5.2 percent, with growth in the first semester slowing slightly from the frenetic pace in the last six months of 2015, before firming again in second half this year once the elections are concluded,” the JP Morgan economist said. With Delon Porcalla, Louella Desiderio