Business leaders positive on Philippines growth momentum

CEBU, Philippines — Some Cebu business leaders have expressed optimism the country’s growth momentum will continue after it posted a 6.8 percent growth in the first quarter of 2018, which is among the fastest in Asia.

"The 6.8 percent growth is positive for the Philippine economy because it has sustained at this level despite lower productivity growth in the agriculture sector," Mandaue Chamber of Commerce and Industry vice president for external affairs Steven Yu told The FREEMAN in a phone interview yesterday.

Yu said he was optimistic that the growth targets for this year will be attained "despite external headwinds" abroad.

"The government’s 'Build, Build, Build' program is expected to further contribute to this growth trajectory towards the year end," the MCCI official said.

The gross domestic product (GDP) growth in first quarter is at par market expectations and close to the low-end of the country’s full-year growth target of 7-8 percent for 2018.

The Philippines remained one of the best performing economies in Asia, next to Vietnam’s 7.4 percent growth, same as China, and higher than Indonesia’s 5.1 percent.

For his part, Cebu Business Club president Gordon Alan Joseph said the strong growth in first quarter solidifies the country’s economic growth story.

Drivers

Meanwhile, public construction, government consumption and capital formation supported infrastructure development.

However, despite improving labor market conditions, private consumption eased to 5.6 percent due to rising inflation and interest rates, and weaker consumer confidence.

External demand also weakened significantly. Growth in exports of goods eased to 2.9 percent, after consistent growth averaging 21.1 percent in 2017. Net exports thus worsened during the quarter.

On the supply side, the 7.9 percent growth in industry was backed by the manufacturing and construction sub-sectors’ continued robust expansion. The services sector also grew by 7.0 percent but agriculture growth weakened to 1.5 percent, after bouncing back from El Niño last year. The fishing subsector further declined by 3.7 percent, its fourth consecutive quarter of decline.

"The risks that can affect GDP growth are the possible negative effects of President Trump’s pullout of the Iran deal and a hawkish monetary policy in the US. However, we are optimistic that chances are, it will be minimal and the growth momentum is expected to continue. Philippines would stand to benefit from any minor trade sanctions that the US will implement against China and Iran," Economic Planning Secretary Ernesto Pernia said in a statement yesterday.

Pernia was hopeful at least the lower end of the 7-8 percent full year GDP growth range target is doable.

Domestic demand is expected to increase in view of the recently approved tax reform package, which is deemed to boost income and consumption of tax payers.  However, we  is a need to boost investor and consumer confidence to sustain this growth.

"For consumers, we need to address sources of rising inflation, even if the uptick brought by the temporary effects of TRAIN are expected to gradually ease. In the short term, we need to hasten mitigating measures such as the Unconditional Cash Transfer to the poorest 50 percent of households, plus the Pantawid-Pasada subsidy for jeepney drivers," he said.