Maybank sees 6.8% growth for Phl this year

MANILA, Philippines - After the 6.4-percent growth rate in the Philippine economy in the second quarter of the year, Maybank ATR Kim Eng said it expects gross domestic product (GDP) to expand 68 percent by the end of the year.

“With first semester GDP growth of six percent that is in line with our outlook, and prospects that logistical challenges and budget problems may be surmounted, we maintain our 6.8 percent forecast for this year and 7.5 percent for 2015,” Luz Lorenzo, senior vice president and chief economist of Maybank ATR Kim Eng, said.

Government maintains its full year growth rate target of 6.5- to 7.5 percent.

Lorenzo added that growth will be led by domestic demand, supported by net primary income, mostly remittances from overseas Filipinos, that grew 14 percent in the first semester, better than 2.1 percent in the same period in 2013.

Net exports at the end of June grew 6.4-percent year-on-year to 4.2 percentage points (ppts), or better than the 3.1 ppts from domestic demand (with -0.9ppts for statistical discrepancy).

Port congestion as a result of the stricter truck ban imposed in Metro Manila this year was to blame for the 10.3-percent growth rate of exports.

“Both import and export growth slackened from the first three months of 2014 but it was more dramatic for imports. Consequently, net exports almost tripled in second quarter. The impact was not evident in first quarter because the truck ban was newly implemented, but the build-up over the months became a real constraint,” the Maybank ATR Kim Eng economist said.

Spending on durable equipment plunged because most durable equipment is imported.

Lorenzo said that construction spending recovered modestly on a pick-up from the private sector but public construction declined, as did government consumption. Controversy surrounding the budget process, especially reallocations by the Department of Budget and Management (DBM) deemed unconstitutional by the Supreme Court are likely behind the pullback in government spending.

As the government addresses issues that distorted economic activity, it is likely domestic demand would regain strength.

Fixed investments may also pick up as port congestion eases, which apparently is starting to happen, as spending on durable equipment recovers. By the same token, total imports are likely to strengthen resulting in weaker growth in net exports.

The economist said that manufacturing has not been a strong point of the economy but since the third quarter of 2013 the sector has become more active. A standout in 2013 was the chemicals industry.

“This year, growth in the sector is more evenly distributed but the food and beverage industries picked up significantly in 2Q14 which we believe reflects the strong state of private consumption,” Lorenzo pointed out.