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Issue date: April 17, 2017


Nomura sees ‘faster’ first-quarter GDP growth


ECONOMIC GROWTH may have picked up last quarter on the back of robust domestic demand and a recovery of external trade as global prospects improved and investors became discerning of local political noise, an economist at an international bank said.


“The early indicators seem like it could be faster than the previous quarters,” Nomura Senior Economist Euben Paracuelles said in an interview last week when asked for an estimate on first-quarter gross domestic product (GDP) growth which the government is scheduled to report on May. 18.

His remarks come after Socioeconomic Planning Secretary Ernesto M. Pernia last month gave a 6.5-7% estimate for those three months that would put the economy on firm footing to achieve the government’s 6.5-7.5% full-year GDP expansion target for 2017.

The bank analyst particularly cited strong trade and car sales.

Merchandise exports jumped by 22.5% in January and by 11% in February that marked the third straight month of growth, according to preliminary data from the Philippine Statistics Authority (PSA). The first two months of the year saw 17.4% growth in outbound shipment of goods, recovering from a 4.2% decline seen in the comparable year-ago period.

This came alongside a sustained rise in imports that averaged 15.8% for the first two months of 2017 versus a 5.8% growth seen a year prior.

The bank analyst also cited sustained strong automobile sales that saw a 23% annual rise to 94,026 units last quarter, according to joint reports of the Chamber of Automotive Manufacturers Philippines, Inc. and the Truck Manufacturers Association, against a 440,000-450,000 full-year target that also includes projected sales of another group, the Association of Vehicle Importers and Distributors, Inc.

“So far, monthly indicators available for the first quarter have actually been stronger than in the fourth quarter...” Mr. Paracuelles said on the sidelines of the Association of Southeast Asian Nations meetings held in Mactan Island, Cebu.

“Definitely, the domestic demand and now the exports story are becoming more synchronized, which tells you that the economy is going to grow faster than the previous quarter.”

Philippine GDP grew by 6.6% in October-December last year, marking the slowest pace in four quarters, though still fueling 2016’s full-year expansion to an upwardly revised 6.9%.

‘YOU CAN SEPARATE THE TWO’
At the same time, Mr. Paracuelles said market sentiment has become more sanguine as investors are learning to see through President Rodrigo R. Duterte’s rough rhetoric and focus on the economy’s continued strong “momentum.”

“The economic momentum is still pretty strong -- if anything, that’s strengthening. The rhetoric hasn’t changed, but I think the economic story has become a bit more positive,” Mr. Paracuelles said, noting that the political noise is not an issue “with reference to the infrastructure agenda.”

“No doubt, the headlines from politics will always be something that could hurt sentiment from time to time, but the question really to us is whether these things will be serious enough to derail the economic agenda... To me, it’s quite clear that you can separate the two.”

International credit raters have flagged rising political uncertainty as a key risk to the Philippines’ growth story, but that growth is widely expected to clock above 6% this year.

Mr. Paracuelles said Mr. Duterte’s tough talk “does not affect” the viability of various infrastructure projects dangled by the national government, as the President steers clear of economic topics and lets his technocrats do the talking.

The Budget department plans to spend as much as P9 trillion on public infrastructure projects over the next six years, in line with the Duterte administration’s commitment to raise the share of infrastructure to 7.1% of the local economy by 2022 from a 5.4% ratio programmed for this year.


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