4Q14 GDP at 6.9%

PHILIPPINES - In Brief 29 Jan 2015 by Romeo Bernardo

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Government announced today a 6.9% GDP growth in 4Q14 that brought the full year average to 6.1%, exactly matching our forecast made early in the year. The big contributor to 4Q14 growth was net exports as sales of electronics products quickened and imports were held down by port congestion and stricter customs processes. Fixed capital investments slowed, traced in particular to the bump last year from airlines' refleeting, even as private constuction spending sped up. Household consumption growth firmed up at 5.1% while government reversed the declines in its consumption and investment spending in 3Q14. The production side also showed strong 4Q14 agricultural output, making up for the previous quarter's losses. It was we think an overall good performance for the private side of the economy last year and expect the momentum, especially in construction activities, to carry over to 2015. On the other hand, government has yet to deliver convincingly on promises of much higher spending, particularly in infrastructure that can ease some of the more visible bottlenecks (e.g., we expect to see even more news coverage of the projected power reserve deficiency in the coming months, notwithstanding efforts to sign up more participants to the distributor's Interruptible Load Program). Nevertheless, we think that the elections 16 months from now are a powerful driver incentive for government to spend more aggressively. Together with the income boost from lower oil prices, we are maintaining a cautiously optimistic outlook, nudging up our 2015 GDP growth forecast to 6.5%.