Gross domestic product growth is expected to accelerate to 6.3 percent in the fourth quarter from 6 percent in the third quarter, the research division of US financial giant Citi said over the weekend.
Citi Research, however, warned that economic expansion could slow down again in 2016 due to lower public investments and uncertainties in the global markets.
Citi said the economy overall would likely grow 5.8 percent this year, slightly faster than its previous estimate of 5.6 percent.
“We updated our fourth-quarter 2015 GDP forecast to 6.3 percent year-on-year for 2015 growth of 5.8 percent [from 5.6 percent] while retaining a slower 2016 outlook of 5.1 percent [previously 4.8 percent],” Citi Research said.
“Domestic demand theme will continue to prevail in a less than stellar 2016 with HH [household] consumption leading the way. Election spending peaks in the first quarter of 2016 but windfall remittance gains with Philippine peso veering to 48.50 [against the US dollar] would prime demand,” it said.
Citi Research said the risk of slower growth momentum next year would come from government in transition that would cause ongoing public investments to slow down sharply post-elections; and offshore developments, led by tightening global rates, uncertain China/emerging markets recovery and unfamiliarity with the new government’s policy agenda that could curtail private investments.
“From nearly 7 percent this year, domestic demand may ease to 5.4 percent in 2016 with ongoing PPP project implementation as the key anti-cyclical growth catalyst in play,” Citi Research said.
The National Economic and Development Authority said last week the 6-percent growth in the third quarter was “certainly an encouraging sign of a steadily growing economy.”
The third-quarter growth was an improvement from the 5.8-percent expansion in the second quarter and from 5.5 percent in the third quarter in 2014. Growth in the first nine months of 2015 averaged 5.6 percent.
Neda officials said a 6-percent full-year growth was very much likely this year, given the better prospects for the fourth quarter.
The third-quarter expansion made the Philippines one of the fastest-growing major Asian economies. The country’s GDP growth was the third fastest after China’s 6.9 percent and Vietnam’s 6.8 percent.
Strong domestic demand fueled output growth, led by significant improvements in government spending and household consumption.
“For the first nine months alone, the average government final consumption expenditure has already reached 7.2 percent, a lofty leap from last year’s contraction of 0.2 for the same period, and a 2014 full-year rate of 1.7 percent. This simply shows that the government is proving successful in its efforts to overcome the spending bottlenecks that hampered growth in the first semester,” Neda said.
Neda said some risks still remained that might impede the country’s growth potential, including the lingering effects of El Niño on the economy, especially for agriculture.
Last year, the economy grew by 6.1 percent, slower than 7.2 percent in 2013, but still considered one of the fastest in the Asian region.