Manila: Growth in the Philippine economy picked up late in 2015 as strong domestic demand and government spending cushioned the impact of weaker exports which are hurting many of its larger, trade-reliant Asian neighbours.
Even the severe El Nino dry spell, which hit farm output, failed to dampen the country’s momentum much.
Driven by strength in the services and industrial sectors, Southeast Asia’s fifth-largest economy grew 6.3 per cent in the fourth quarter from a year earlier, faster than the 5.9 per cent economists had predicted and picking up pace from a revised 6.1 per cent in the third quarter.
That brought full-year growth to 5.8 per cent, national statistician Lisa Grace Bersales told a news conference, which could mark one of the strongest expansions in the world in turbulent 2015. China has reported 2015 growth of 6.9 per cent and Vietnam 6.7 per cent.
On a quarterly basis, the economy once known as “the sick man of Asia” grew 2.0 per cent in the fourth quarter from the previous three months, slightly less than markets had expected but eclipsing China’s 1.6 per cent.
“The Philippines is not as heavily leveraged to external growth as some of the other countries in the region, and domestic demand, predominantly government spending and investment spending, is what really pushed up the growth numbers in the fourth quarter,” said Rahul Bajoria, regional economist at Barclays Bank in Singapore.
“Going into 2016, this momentum should generally be sustained. We are expecting growth to be around 5.5 per cent in 2016, slightly lower than 2015 but it’s broadly still in a very comfortable position.” The strong performance appears to support the central bank’s conviction that the economy does not need additional stimulus at the moment.
“The significant cushion of private consumption, accounting for almost 70 per cent of GDP, will insulate the country from the slowdown emanating from much of the emerging markets,” ANZ economist Eugenia Victorino wrote in a note before the data was released.
Nearly $40 billion (Dh147 billion) worth of inflows from business outsourcing contracts and millions of Filipinos working overseas flood into the Philippines every year, lifting incomes and spurring demand for property, cars and other consumer goods and services.
The 4.5 per cent slide in the value of the peso against the dollar last year also boosted the purchasing power of the funds sent home by overseas Filipinos.
Real estate loans were at a record 1.23 trillion Philippine pesos ($25.69 billion) at end-September last year, central bank date showed, while car sales hit an all-time high in 2015.
“While a number of central banks have eased their policy settings to stimulate domestic economic activity amid a benign inflation environment, we in the Philippines don’t see the need to provide further stimulus to the economy at the moment,” central bank Governor Amando Tetangco told Reuters in an interview on Wednesday.
Tetangco said there was ample liquidity in the system to support the economy’s needs, and the government has fiscal space to build and improve the country’s infrastructure.
Growth should also be supported by a burst of campaign spending ahead of presidential elections on May 9, Tetangco said, supporting the case for steady interest rates.
Under outgoing President Benigno Aquino, the economy grew an average of 6.3 per cent annually, the best 5-year record in four decades, helping cut the jobless rate to a record low of 5.6 per cent.
His efforts to collect more revenue by intensifying a campaign against tax evasion and corruption, as well as prioritising infrastructure, helped win the country investment grade ratings from major credit agencies.
The Philippines has not been totally immune to capital outflows being seen by many emerging markets, triggered by expectations of higher US interest rates, concerns over China’s slowing economy and plummeting oil prices. But analysts say its robust growth, strong current account and adequate forex reserves have differentiated it from its regional peers.