PHL output falls short of meeting 6.5-7.5% target

Hitting the lower end of the 6.5 to 7.5 percent GDP target set by government for 2014 is now unlikely after the Philippine economy performed below expectations in the third quarter, the largest and most influential business group said Thursday. 

 

Even if the economy performs strongly in the fourth quarter, meeting the target is nearly impossible, Philippine Chamber of Commerce and Industry chairman Sergio Ortiz-Luis Jr. told GMA News Online.

 

"The fourth quarter growth rate is expected to be higher than the third quarter. How much higher is the question. I don't see anything dramatic. Mahirap na ma-hit ang target," he said.

 

"The thing is government is very conscious about their target," Ortiz-Luis noted.

 

On Thursday, the Philippine Statistics Authority reported the economy grew by 5.3 percent in the third quarter, slower than the actual 6.4 percent in the second quarter and from 6.9 percent a year earlier.

 

Counting the third quarter results, the nine-month economic expansion settled at 5.8 percent – below government's full-year target.

'A big challenge'

 

Socioeconomic Secretary Arsenio Balisacan admitted that even the low-end of the growth target "would pose a big challenge."

 

The economy would have to grow by at least 8.2 percent in the fourth quarter to meet 6.5 percent for the whole of 2014, the Cabinet official said.

 

In late October, Balisacan dismissed the possibility of achieving the higher end of growth for this year given how economy performed during the first half of the year.

 

While the third quarter GDP came as a surprise, Bangko Sentral ng Pilipinas (BSP) Governor Amando Tetangco Jr. said private and public spending would serve as pillars of the economy in the fourth quarter.

 

"We expect GDP would continue to be buoyed by private consumption and as the national government clears up spending bottlenecks," he said in a text message to reporters.

 

"With the inflation outlook generally manageable over the policy horizon, the BSP's current policy stance should be able to help keep economic activity supported," the central bank chief added.

'The wild card'

 

In a research note, ING Bank N.V. senior economist Joey Cuyegkeng said the Philippine output may partially recover in the last quarter and manage to grow between 5.9 and 6 percent.

 

ING Bank gave a full-year 2014 estimate of 5.8 percent.

 

"Government spending is the wild card. Optimism of a rebound in government spending is fading. A surge in October government spending would buoy sentiment and support a stronger Q4 GDP performance," Cuyegkeng said.

 

Household consumption is likely to recover with inflation easing at the same time, the economist noted. 

 

On Wednesday, the central bank said it saw no need to tweak monetary policy with the November inflation expected to be within the range of 3.5 to 4.3 percent.

 

In October, consumer prices slowed to 4.3 percent, compared with 4.4 percent in September but faster than the 2.9 percent a year earlier, PSA data showed.

 

The fourth quarter output will also get a boost from the economic and good governance reforms, Finance Secretary Cesar V. Purisima said in an e-mailed statement.

 

"Ingredients for sustained growth remain abundant as the fundamentals of our economy remain sound. The current account is at a hefty surplus of 2.9 percent of GDP in the first half of the year, and the fiscal deficit is well below our ceiling, ensuring we have the necessary fiscal space to spend productively," he said.

 

"We expect more solid foundations for growth as Congress approves our priority proposals on fiscal incentives rationalization and transparency, and amendments on the Build Operate Transfer Law and Foreign Investments Negative List," he added. – VS, GMA News