Thursday, January 30, 2014

Philippines Economy Shows Resilience

The Philippines’ December quarter GDP data due Thursday is likely to remain supportive of the growth trajectory for 2014. We expect the December quarter GDP to come in at 6.0% on-year, leading to full-year GDP
growth of 7.0% on-year for 2013. Domestic demand remains robust in the economy, even if private consumption growth might have moderated slightly in the December quarter. Sustained growth in the construction sector has propped up overall GDP growth and we expect this to remain in the picture this year. An accommodative monetary policy persists for now and the government continues to have ample fiscal room to further boost growth if needed.

Impact from the typhoon on domestic demand in the December quarter is likely to have been lim¬ited. This is also evidenced by the better than expected November imports data last week. Imports of capital goods rebounded in November, suggesting that the slide in October was temporary. The reconstruction efforts post-Typhoon Haiyan is scheduled to start in the next couple of weeks and fiscal spending will be focused on housing, education and social welfare. Expect to see immediate impact on the domestic economy from these projects.

We look for GDP growth to remain relatively strong at 6.5% on-year in 2014. Besides the ongoing infrastructure overhaul, exports should also see a modest lift this year. Recent signs of a sustained recovery in exports of electronics and electrical products are definitely encouraging on this front.