Better-than-expected GDP growth

PHILIPPINES - In Brief 30 Jan 2014 by Romeo Bernardo

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At 6.5%, 4Q13 GDP growth reached the top end of the government's revised forecast, confirming its assessment of Typhoon Haiyan's limited growth impact. Apart from the overall growth rate, the good news from the 4Q GDP release include stable, albeit slower, consumption growth (5.6%), double-digit growth in investments in durable equipment (15.5%) and continuing growth in exports of both goods and services (6.4%). The supply side shows continuing healthy service sector growth (6.5%) and accelerating manufacturing value-added (12.3%). On the other hand, weakness in public spending, which we warned about, is revealed in yoy declines in government consumption (-5.2%) and construction (-1%). Troubling as well is the 0.4% dip in private construction which followed last quarter's growth slowdown to single digit, albeit this also reflects some base effects due to the impressive growth last year. Meanwhile, the slow growth in goods imports (1.1%) is puzzling until we are reminded of reports of continuing smuggling, especially of oil. All told, the better-than-expected 4Q13 performance brought full year GDP growth to 7.2%, our pre-typhoon forecast. Despite this, we remain less confident than other analysts that increased government spending for post-disaster reconstruction will bring 2014 growth above 6.5%, especially given its poor spending record recently. Aside from the start of construction of a couple of PPP tollroads, we have yet to be convinced that there are new growth drivers in the horizon, particularly FDI. At the moment, we see increased risk of tighter domestic financial conditions as capital outflows increase which may dent consumer and business confidence. Addition...