GDP GROWTH SEEN TO GROW OVER 7% THIS YEAR / EDITORIAL: 'PORK' SCAM ECLIPSED GROWTH
MANILA, SEPTEMBER 2, 2013 (PHILSTAR) By Kathleen A. Martin and Ted P. Torres - The Philippine economy is expected to grow over seven percent this year, eclipsing the high end of the government’s official 6-7 percent target.
In separate reports, New York-based think tank GlobalSource Partners and the Ayala-led Bank of the Philippine Islands (BPI) said gross domestic product (GDP) growth would hit 7.2 percent this year, coming off a strong 7.6-percent expansion in the first half.
In a market commentary, GlobalSource analysts Romeo L. Bernardo and Marie Christine Tang said they are keeping their full-year forecast of a 7.2 percent expansion, although they expect growth to settle below seven percent this quarter and the next.
GDP expanded 7.5 percent in the second quarter, matching China as the fastest-growing in Asia, sustaining the over seven percent pace for a fourth straight quarter.
GlobalSource said growth this year was primarily due to the mid-term elections in May which helped drive government and household spending for the first semester.
But aside from the election-related boost the economy got in the first half, Bernardo and Tang noted other downside risks to growth in the second semester such as the declining consumption growth.
The analysts pointed out that since consumption growth has been decelerating over the past four quarters, “it is hard to tell at this time if the peso depreciation’s boost to incomes from dollar remittances can reverse the trend.”
Another downside risk, Bernardo and Tang said, is the possible “more timid” government spending for the rest of the year amid the unfolding multi-billion peso pork barrel scandal.
A whistleblower has alleged lawmakers partnering with fake non-government organizations in order to divert pork barrel funds into their own pockets. Pork barrel refers to the government’s allocated funds for lawmakers meant to finance localized projects.
At the same time, Bernardo and Tang said “dampened investor confidence due to recent financial market developments” may drag economic growth in the second semester.
The Philippines, as well as other emerging markets in the region, are experiencing volatilities amid the impending tapering of the US Federal Reserve and the geopolitical risks in Syria.
Meanwhile, BPI has upgraded its full-year GDP growth forecast from the previous 6-6.5 percent range.
“Momentum seen in the first semester is likely to moderate in the second half 2013, especially as front-loading, or spending earlier during the year, is a common occurrence during election years,” it said in a report.
However, BPI pointed out that strong consumption growth would cushion the negative impact of recurring investor fears about ‘tapering’ and the escalation in volatility due to concerns about Indonesia’s burgeoning current account deficit.
“Consumer prices could also experience temporary upward pressure in the light of the recent geopolitical turmoil in Syria, which has driven oil prices higher by 6.18 percent (Brent crude) month-to-date,” BPI said.
The US Energy Information Administration forecasts that the global benchmark price of crude oil (Brent) will average $102 per barrel in the fourth quarter (currently at $114.36), reflecting the increasing supply of liquid fuels from non-OPEC countries.
EDITORIAL - Strong growth (The Philippine Star) | Updated September 1, 2013 - 12:00am 0 5 googleplus1 0
The pork barrel scandal eclipsed the positive news the other day: with 7.5 percent GDP growth in the second quarter, the Philippine economy is now the fastest growing in Southeast Asia, matching the much-slowed growth rate of China.
As in the past, the GDP growth was consumer-driven, with some analysts noting that election spending was a major factor in the second quarter. But the services sector, manufacturing and construction also contributed to the growth as well as higher investments in fixed capital. Growth in industry was faster than in the services sector.
These trends indicate that the economy is becoming less reliant on consumer spending and the remittances of overseas Filipino workers, and there is increasing activity in areas that account for sustainable growth. These are the areas that create jobs and pave the way for inclusive growth – something that has eluded the nation despite strong economic performance.
Driving these increased economic activities is high business confidence in the past three years. That confidence, in turn, has been fueled in large part by the focus of the Aquino administration on the campaign against corruption.
This campaign has been shaken by recent corruption scandals such as those on the pork barrel and the Metro Rail Transit 3, particularly because officials or political allies of the administration have been implicated. The daang matuwid administration came to power on a platform of good governance. It cannot afford to let corruption scandals erode the moral authority that is indispensable in delivering on its campaign promise.
In dealing with the scandals, reforms must be implemented quickly and the guilty identified, prosecuted and punished before cynicism takes root even among those who at this point remain generally supportive of the administration. Restoring public trust quickly is necessary if President Aquino wants to sustain strong economic growth and make its benefits trickle down to the masses.
Chief News Editor: Sol Jose Vanzi
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