Economic Planning Secretary Ernesto Pernia said that robust domestic demand underpinned 6.6 per cent growth in the fourth quarter, helping offset a contraction in agriculture and slowing government spending.
The 6.8 per cent expansion for the year was at the high end of the government’s target of 6.0 to 7.0 per cent growth. Growth in the past seven years has averaged 6.3 per cent.
The country’s brash-talking president, Rodrigo Duterte, inherited a relatively vibrant economy when he took office in June, pledging to slash the poverty rate. But investors are wary of his brutal anti-drug campaign, which has left more than 7,000 dead, his anti-U.S. rhetoric and erratic comments including threatening to declare martial law as part of his war on drugs.
Pernia said the latest data were a “testament that our economy remains robust and is growing at a healthy and steady pace.”
Growth will likely meet the official 2017 target of 6.5 to 7.5 per cent and could accelerate in the medium term to 7 to 8 per cent, he said.
But risks include the country’s vulnerability to extreme weather such as drought and strong typhoons, possible policy shifts in the U.S. and greater volatility in capital flows.
“The uncertain political situation at home and Donald Trump’s election in the U.S. represent the major downside risks to the economy,” Gareth Leather of Capital Economics said in a commentary.
Pernia said the government hopes to gain “upper middle-income” status for the Philippines. The would require raising gross national income per capita to over $8,000 from less than half that now. The government also aims to help 6 million out of 22 million Filipinos escape poverty by 2022.
The Philippines has a population of around 104 million people.
Leather said he expects the economy to thrive in the near future, with low interest rates supporting investment and consumer demand, and government spending on roads and other infrastructure to boost growth.
But if American companies succumb to pressure from Trump to bring back to the U.S. work outsourced to the Philippines, such as call centres, the country would be hit hard, Leather said.
Revenues from outsourcing amounts to about 10 per cent of the Philippines’ gross domestic product. The country also is vulnerable to policies that might adversely affect exports to the U.S., which comprise 4 per cent of GDP, or remittances from the U.S. that account for 3 per cent of GDP.