Domestic demand seen pushing GDP growth

MANILA, Philippines - A strong recovery in domestic demand is seen to boost gross domestic product (GDP) growth in the second quarter as the government speeds up its recovery and reconstruction program for typhoon-stricken areas.

In the latest issue of The Market Call, First Metro Investments Corp. (FMIC) and the University of Asia and the Pacific (UAP) said domestic demand would get a boost from resilient consumer spending and massive reconstruction work in Visayas.

“While the outlook for the first quarter is a bit somber than usual, we see second quarter performance as key to a resurgence of better economic news for the year. Domestic demand, which had been affected by the lingering effects of Super Typhoon Yolanda, is set to recover sharply in the second quarter buoyed by reconstruction work in affected areas and by stronger consumer spending due to high growth in peso OFW remittances and exports,” FMIC said.

The Aquino administration had released P26.5 billion as of March 10 to implement post-disaster projects to ensure the country’s continued growth.

FMIC-UAP noted that the revival of global demand has lifted production in the manufacturing sector, driving the sector’s growth to 7.2 percent and extending the upward trajectory of the country’s exports.

It sees exports accelerating slightly in the coming quarters led by stronger US and EU demand.

OFW remittances in dollar terms are forecast to revert to the five to six percent growth range as emergency remittances for typhoon-affected OFW families ease to more normal pace.

“With the strong export performance in January together with a softer peso, we expect that exports will be boosted in 2014 and bring the economy closer to the seven percent growth target of the Department of Trade and Industry,” FMIC-UAP said.

FMIC-UAP said efforts of banks and non-bank remittance service providers to expand their domestic and international presence also helped boost remittance flows.

Cash remittances from overseas Filipinos coursed through banks rose 5.9 percent year on year to $1.8 billion.

FMIC expects inflation to hover around four percent in the second quarter.

Inflation slowed for the second straight month in March to 3.9 percent from 4.1 percent in February due to lower prices of alcoholic beverages and tobacco.

The softer March inflation was also attributed to lower prices of housing, water, electricity, gas and other fuels.