Consumption, investment to boost economy in 2018: S&P report

Debt watcher S&P forecasts consumption and investments to regain their foothold as the main growth drivers of the Philippine economy this 2018. (Photo by HelloFoto77/Flickr, CC BY-ND 2.0)

MANILA — Debt watcher S&P forecasts consumption and investments to regain their foothold as the main growth drivers of the Philippine economy this 2018.

It projects the domestic economy to expand by 6.5 percent, as measured by Gross Domestic Product (GDP), this year. This growth projection is, however, lower than the government’s seven to eight percent target for 2018-22.

“As the Q4 figures show, the resurgence of private household spending came just in time, as electronics exports were no longer able to prevent the usual negative contribution of net exports to growth,” S&P said in a report.

Last year, the domestic economy expanded by 6.7 percent, within the government’s 6.5-7.5 percent target.

Data from the Philippine Statistics Office (PSA) show that growth of the economy got its boost from manufacturing, trade, and real estate, renting and business activities in the last quarter alone.

Among the sectors, industry registered the fastest rise at 7.3 percent followed by Services, 6.8 percent; and Agriculture, 2.4 percent, which in turn, made a turn-around after a 1.3 percent drop a year ago.

S&P said growth of the economy remained resilient even at the latter part of last year  after the recovery of private consumption, which contributed less in the first three quarter of 2017.

“Interestingly, net exports detracted from growth despite the ongoing boom in electronics exports,” it noted.

Meanwhile, the credit rater is on the lookout for more developments on the country’s current account, which registered small deficits in some months of 2017 due to continued higher importation as needed by the sustained expansion of the domestic economy.

The study said the current account is also affected by slower remittance inflows and higher energy prices.

“Although we do not expect a significant widening of the deficit under our baseline, such as scenario would increase the Philippines’ exposure to potential sudden capital outflows in times of market panic,” it added.