Economists see Q1 GDP slower at 6.4% as Yolanda, trade deficit take center stage

The Philippine economy slowed down in the first quarter, as it continues to reel from the ravages of Typhoon Yolanda while merchandise trade remain unencouraging, economists interviewed by GMA News Online said.

 

Gross domestic product (GDP) growth in January to March likely hit 6.4 percent, according a median forecast of four economists. 

 

The forecast – which is below government's 6.5 to 7.5 percent goal – is slower compared with the actual 6.5 percent in the fourth quarter of 2013 and 7.7 percent a year earlier.

 

The government is set to announce results of the first quarter economic performance on Thursday.

 

The impact of Typhoon Yolanda will be reflected in the first quarter, Security Bank Corp. economist Patrick Ella said on Wednesday.

 

"But the first quarter will be the lowest barring natural disasters in the second half of the year," he noted.

 

Typhoon Yolanda, the strongest to hit land on record, curbed growth in the fourth quarter as expected.

 

The super typhoon barreled through Central Philippines on Nov. 8, flattening towns and cities, and killing at least 6,200 people.

 

"We would have expected even faster GDP growth, but looking at the agricultural data for the first quarter, it appears that the spillover effects of typhoons and disasters last year were worse than initially anticipated," said Remrick E. Patagan, Institute for Development and Econometric Analysis (IDEA) Macroeconomic Research and Special Studies Group head.

 

IDEA's forecast placed the GDP between 6.5 and 7.6 percent.

 

The trade gap effect

The slowdown is also an effect of a wider trade deficit for the period.

 

"The economy will likely decelerate on higher import growth despite relatively strong export performance, resulting in a net trade deficit," HSBC economist in Hong Kong Trinh Nguyen said in a separate e-mail message.

 

In the first quarter, imports totaled to $16.17 billion, up 12 percent from $14.44 billion a year earlier.

 

Exports, meanwhile, rose 6.5 percent to $14.3 billion from $13.4 billion.

 

This brought the trade deficit for the three-month period to $1.85 billion, widening from $1.05 billion year-on-year.

Govt, private sector spending

 

However, continued spending from the private and public sector may temper both effects of Yolanda and a wider trade gap. 

 

"Some slowdown in the manufacturing output is being offset by strong construction and services sectors," Nomura Singapore Limited executive director Euben Paracuelles said in a separate e-mail.

 

Since Yolanda, government has ramped up rebuilding efforts in the typhoon-hit areas.

 

As of end-February, the Department of Budget and Management said infrastructure and capital outlay spending rose by half to P49.8 billion from P33.3 billion a year earlier, primarily on big ticket projects that were approved and post-Yolanda reconstruction efforts.

 

"Consumption spending is expected to grow between 5 and 6 percent... while government disbursements will show up in the national accounts," Ella said.

 

Remittances, which grew by 6 percent to $5.5 billion in the first quarter from $5.2 billion a year earlier will continue to fuel consumer spending, he added. – VS, GMA News