Phl economy now investment driven

MANILA, Philippines - The Philippine economy is now more investment-driven, putting growth on a more sustainable path over the next two to three years, a unit of the Bank of the Philippine Islands (BPI) said yesterday.

“The macro environment is extremely supportive of growth and the economy should continue to show similar performance in the next two to three years,” BPI Asset Management said in a market research.

 â€œWe think that the Philippines is in the midst of an investment boom, anchored by the low interest rate environment and the government’s determination to improve infrastructure,” it added.

A growth forecast range of six to 6.5 percent was retained by BPI, although it added that it sees the year-end average to settle at the “upper limit.” This was after the economy posted with a strong 7.8 percent expansion.

Last year, the economy grew by 6.3 percent in the first quarter, six percent in the second quarter and 7.1 percent for the last six months. The average of 6.8 percent surpassed 10-year average of 5.2 percent, the report said.

According to the bank, private consumption, which benefits from billions of remittances every month, will remain a key driver of growth this year. Accelerated state spending was also credited for the expected growth.

For the first three months, consumption expanded 6.8 percent, while remittances from overseas Filipinos rose 5.6 percent. Analysts have long held the view that remittances give more purchasing power to Filipinos.

In addition, BPI said private investments are already contributing more to growth, side by side with state disbursements. For instance, the bank noted that 53 percent of listed companies reported a 14 percent uptick in capital expenditures in the first quarter.

 Moreover, construction, which was among the primary drivers of the first quarter growth, could get further boost from public-private partnership (PPP) undertakings, seven of which are now being bid out.

A total of three PPP projects worth P26 billion— the Daang-hari-South Luzon Expressway link, School Infrastructure Project and NAIA Expressway— have already been awarded.

A stellar economic performance, BPI said, will bode well for the financial markets, which have been rattled in recent days by fears of the US withdrawing cheap money from its stimulus measures.

At the bond market, inflationary pressures that would come with solid expansion would likely push yields higher “albeit at a milder pace.” The local bourse, on the other hand, may rebound soon.

The Philippine Stock Exchange index, one of the world’s best performers last year, has lost more than a tenth of its value since its last peak on May 15. It recovered from a three-day slump yesterday, adding 51.12 points to close at 6,609.010.

 â€œStill, we remain confident of our 7,500-7,700 year-end target on the back of the economy’s positive fundamentals and we view this recent reversal as an opportunity to further build on positions,” BPI said.