GDP growing by 5.7 percent isn’t so bad

Categories: Business Updates

Date Posted: 08 Jul 2014


Why business confidence must remain high

WHILE we wait for the official report on the Philippine economy’s performance in the second quarter, mixed signals are coming out of the government and the private sector, with the former more optimistic than the latter.

Socioeconomic Planning Secretary Arsenio M. Balisacan said last month that the economy, as measured by gross domestic product (GDP), grew in the second quarter, faster than the 5.7 percent posted in the first quarter. He added that the economy must grow by an average of 6.8 percent in the remaining three quarters to reach the low end of the government’s target.

Bangko Sentral ng Pilipinas (BSP) Governor Amando M. Tetangco Jr. was quoted in a report as saying the official GDP growth target of 6.5 percent to 7.5 percent for 2014 was still achievable, despite the lower growth in the first quarter of this year, compared with the 7.7 percent posted in the same period in 2013.

Last week, however, I saw a report citing Dutch investment bank ING as predicting GDP growth of 5.7 percent for the whole year.

As I said earlier, I would rather wait for the official report on the economy’s performance in the second quarter to see where we are going for the rest of the year.

At this point, regardless of the economy’s performance in the first quarter, our fundamentals remain strong, despite higher inflation.

The BSP’s Monetary Board has opted, in the meantime, not to raise its policy rates, which would signal banks to raise their lending rates. Even if it did, as I also said earlier, a minimal increase in interest rates would not affect growth. The 4.5-percent inflation rate registered in the first quarter only had a minimal impact on business.

Cash remittances from overseas Filipinos continue to grow. It reached $1.9 billion in April, a 5.2-percent increase from the same month last year. This brought total cash remittances for the first four months of the year to $7.4 billion, up by 5.8 percent from the same period in 2013.

These remittances and the robustly growing business-process outsourcing (BPO) industry continue to fuel consumer spending, which, in turn, drive economic growth. In addition to strong fundamentals, what is important is that business confidence in the Philippine economy remains high. A change in the businessmen’s attitude is the worst that can happen, which will lead to failure to sustain fast-paced growth.

Having said that, I am confident that the attitude of businessmen will remain positive.

Based on the results of the BSP’s Business Expectations Survey, which was conducted between April 1 to May 14 and involved interviews with the executives of 1,529 companies nationwide, the businesses’ outlook on the economy remains bullish.

Apart from the strong fundamentals, the respondents listed these factors behind their optimism: robust consumer demand; new construction projects (both private and public) that were boosted by rehabilitation efforts in the areas affected by Supertyphoon Yolanda (international code name Haiyan) and by increased infrastructure spending; increase in orders and new contracts or projects leading to higher volume of production; the expansion of businesses; the launch of new product lines and rise in investments, with the recovery of the US and other export markets; and continuing confidence in the Aquino administration.

Outside of these reports, we see the changing skyline in Mega Manila and in many cities across the country as a testimony to business confidence.

We can see all the developers coming out with grandiose plans, with projects routinely costing hundreds of millions, or even billions, of pesos. In Mega Manila many big projects are already past the planning phase and are in various stages of construction. Some examples are Ayala’s projects in the Food Terminal compound in Taguig City, as well as in Porac municipality, Pampanga province.

Even Megaworld has gone far from Mega Manila. It is launching big projects in the cities of Iloilo, Cebu and Davao.

Vista Land is still developing Evia, its flagship mixed-development project in Cavite province. At the same time, the company continues to undertake large-ticket development projects in Iloilo province and is planning similar ventures in other provinces.

Just last week, Starmalls Inc. inaugurated the first phase of its Starmall Prima project in Taguig, the first of four high-end malls that the company plans to open this year. And other developers have their own big plans.

This, in my view, is business confidence, which is what we need to reverse the disappointment over the economy’s performance in the first quarter, and boost growth in the remaining months of the year.


Written by: Manny V. Villar

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