by: Sarah Joson
Monday, July 6, 2015 |
“Promising” private consumption and state spending are anticipated for the Philippines, which is why HSBC LTD. (HSBC) raised its gross domestic product (GDP) growth forecast for the Philippines this year - even with the country’s poor performance during the first quarter.
Trinh D. Nguyen, economist at HSBC, said in a research note to clients that she’s anticipating a 6.0% growth for the Philippine economy this year, despite the 5.2% growth recorded during the first quarter. The growth is noted as the weakest performance in the last three years, and is said to be caused by restricted government expenditures and flagging exports.
Initial growth projection for the country was at 5.9%, which still falls short of the 7-8% target eyed by the government.
Ms. Nguyen also noted that even with last quarter’s “disappointing” figures, the outlook for GDP growth is positive. She added that the Philippine economy is well supported by strong private consumption which is a crucial factor to a country’s GDP success.
She cited household spending as an example where she explained that it is impossible for policy makers to influence the segment as policy takes effect much later. It is dependent on several factors like inflation, needs, demographics, future income, among others.
Moreover, she noted that fiscal and monetary policy can drive private spending, but will not spontaneously push households to spend more. The stable private consumption in the country clearly indicates low household debt, steady remittance inflows, and rapid growth of the population.
She then pointed out that since private consumption is bullish, the government should likewise spend as planned to reach its growth target. If the money allotted is spent properly by the government, she predicts that it will grow faster than the projected 6% growth. In fact, she said delimited government expenditure, not household spending, is inhibiting the Philippines from reaching and sustaining a growth rate above the 7% range.
The economist said fiscal consolidation has enabled the government to spend in the future, wherein funds will be apportioned to improving infrastructure like airport and its power supply to raise competitiveness and productivity.
All in all, Ms. Nguyen explained that the Philippines is in a favorable position as one of the emerging economies since it can support growth this year, and even the future.