Boost from PPP rollouts, poll spending: Growth to pick up pace this year – Moody’s

MANILA, Philippines – The Philippines will likely accelerate its economic expansion this year, putting it in a more robust position in the region to weather any further global economic and financial market volatility, Moody’s Investors Service said.

Moody’s vice president and senior analyst Christian de Guzman said in an analysis titled “Philippines’ growth shows resistance to global slowdown, a credit positive,” the country’s gross domestic product (GDP) growth is expected to pick up to six percent this year from 5.8 percent last year.

“We expect six percent GDP growth in 2016, up from 5.8 percent in 2015,” he said.

De Guzman said increased government spending from infrastructure projects, particularly those under the public-private partnership (PPP) scheme, as well as higher private consumption as a result of the national elections in May would boost the country’s economy.

“Looking ahead, the PPP program for infrastructure development and a pickup in economic activity as the country gears up for midyear elections will underpin growth,” he added.

President Aquino is set to step down in June, ending his six-year term.

“Although the presidential elections create some political uncertainty, we expect economic reform and policies that foster infrastructure investment and maintain fiscal prudence to remain the key long-term goals of the government,” Moody’s said.

GDP expansion picked up to 6.3 percent in the fourth quarter from the revised 6.1 percent in the third quarter last year due to robust domestic demand and improving government spending.

However, growth slowed down to 5.8 percent last year from 6.1 percent in 2014 and missed the 7-8 percent target penned by economic managers.

The Moody’s executive pointed out stronger government spending and robust household consumption and services exports buffered the economy against deteriorating global growth.

He added even the severe El Niño dry spell, which hit farm output, failed to stymie expansion.

“This strong performance comes at a time when weak global demand is slowing growth in export-oriented Asian economies, and puts the Philippines in a more robust position than many of its regional peers to weather any further global economic and financial market volatility,” De Guzman said.

Moody’s upgraded the country’s credit rating to Baa2 or two notches above “junk” status in December 2014 on the back of the government’s reduced debt levels and the country’s robust economy.

“The strong growth is credit positive because it demonstrates the economy’s resistance to global shocks and points to the government’s ability and willingness to shore up domestic demand amid a weak external environment.

Although the Philippines is not immune to the economic slowdown in China, de Guzman said the country is less reliant on Chinese demand than many of its regional peers.

“Whereas many Asian countries count China as their largest export partner, it is the Philippines’ fourth-largest export destination. The Philippines is also much less dependent on commodity receipts for exports or fiscal revenues than its regional peers,” he added.