New York-based think tank Global Source expects the economy to grow by a slower 6.1 percent this year from a strong 7.2-percent growth in 2013, citing a drop in public consumption and government failure to speed up typhoon-related infrastructure spending.
“We expect to see growth averaging 6.1 percent this year,” analysts Romeo L. Bernardo and Marie-Christine Tang said in a report.
The new figure was below the government’s target of 6.5 to 7.5 percent growth this year. For next year, Global Source expects the economy to grow by 6.4 percent.
The economy expanded by a faster-than-expected 7.2 percent last year, driven largely by services and manufacturing sectors and increased spending on infrastructure.
While there are “promising growth boosters” this year including the rebuilding efforts following typhoons that hit the country in late 2013, Global Source said rehabilitation is not expected to be carried out this year so impact to economic growth may not be maximized.
At the same time, the report said power and public-private partnership projects in the pipeline may unlikely contribute “much more than half a percentage point to growth.”
Global Source said consumption may slow down this year due to rising inflation and borrowing cost.
“Although consumption will continue to gain from continuing growth in remittances, we expect a slight dip in growth as inflation and the cost of borrowing rise,” it said.
“This early, we are hearing of reduced retail sales as households scrimp on nonessentials in anticipation of higher electricity charges,” the report added.
Global Source said exports would provide a lift to economic growth as trade is expected to be robust following recovery in developed markets. “Imports of goods are also seen rising this year, partly due to requirements for reconstruction in typhoon-hit areas,” it said.
“We think investments can continue its double-digit growth given the above new construction works as well as remaining steam in the current real estate cycle,” the report said.
Global Source said investment won’t accelerate at an impressive rate this year as infrastructure bottlenecks and increasingly visible examples of “regulatory/ political risks give investors, particularly FDI, a pause.”
Global Source said given the approaching presidential elections in 2016, the government may act quickly on infrastructure projects that may further accelerate spending, contributing to higher economic growth.
“Be that as it may, we do not anticipate at this time a galloping economy even in 2015, in part because election uncertainties will mean some delays in investment timetables,” the report said.
“The much publicized integration of Asean markets is unlikely to have any perceptible short-term growth impact. This is because intra-regional trade, with perhaps the only exception of sugar, have long been liberalized while the ground rules for opening up services have yet to be agreed upon,” it said.