GDP growth likely at 7% in 2016 – Metrobank

High end of gov’t target

MANILA, Philippines - Banking giant Metropolitan Bank & Trust Co. (Metrobank) has raised the country’s economic growth forecast this year to seven percent from an earlier 6.3 percent amid the expected strong cash remittances in the last quarter of the year.

Pauline May Ann Revillas, research analyst at Metrobank, said the Philippine economy once again surprised markets, posting a stronger-than-expected gross domestic product (GDP) expansion of 7.1 percent in the third quarter from seven percent in the second quarter.

This brought the average GDP growth to seven percent in the first nine months of the year, or at the higher end of the six to seven percent expansion penned by economic managers.

“Research has noted before that its full-year average forecast of 6.3 percent had further upside bias, and given the stellar economic growth in the third quarter, this will now be revised upwards towards the seven percent level,” she said.

Revillas added the continued weakening of the peso gives beneficiaries of cash remittances from overseas Filipinos would have even more purchasing power this Christmas season.

“This will keep fourth quarter consumer spending on an uptick, providing some counterbalance to base effects from last year’s strong yearend finish as well. Thus, a 2016 full-year growth rate of seven percent is well within the cards,” she said.

Latest data from the BSP showed cash remittances grew 6.7 percent to hit a year-high of $2.38 billion in September from $2.23 billion in the same month last year.

Cash remittances grew 4.8 percent to $20.02 billion in the first nine months of the year from $19.1 billion in the same period last year exceeding the full-year four percent growth target set by the BSP.

Revillas attributed the solid economic expansion in the third quarter to robust consumption spending, sustained double-digit growth in investment spending, rebound in the agriculture sector, and faster expansion of the industry sector.

On the demand side, she explained consumption spending remained solid, expanding by 7.3 percent, supported by positive remittances growth and still low inflation rates.

On the other hand, she added investment spending resumed its solid expansions since the first quarter of 2015 amid the strong growth of its construction and durable equipment subsectors.  

Government spending, as what has been previously expected, posted a slower growth on base effects. Imports continued to grow faster than exports amid a number of factors – sustained rise in capital goods imports, strong US dollar, and fragile economies of major trading partners.

The economist pointed out the plans for massive infrastructure spending by the Duterte administration is seen to further boost investment spending growth.

“The sustained expansion in Investment spending is expected to shield the domestic economy from negative externalities and form the backbone for a more inclusive growth,” she said.