BRITISH banking giant Hongkong and Shanghai Banking Corp. said consumption will remain a strong growth driver for the Philippines, with robust remittances from overseas Filipinos fuel spending.
In a report titled “Asean Perspectives : Consider the consumer,” HSBC said private consumption encompasses 73.5 percent of GDP in the Philippines, higher than that of the US.
“Consumption remains the primary anchor to Philippine economic growth, constituting over 70 percent of the country’s GDP. Private consumption has remained strong over the years due to robust remittances and a continued decline in the unemployment rate,” the bank said.
Meanwhile, HSBC said increased public spending resulted not just in an acceleration of infrastructure spending but also a pickup in government consumption. It said taken together, Philippine domestic demand often largely offset the external sector’s (net exports) negative contribution to growth.
“We believe this trend is likely to continue in the foreseeable future, resulting in the Philippines remaining relatively insulated to external growth risks,” HSBC said.
Citing government data, it said recent labor statistics suggested the country’s workforce was gradually shifting from agriculture to construction in an effort to take part in the government’s infrastructure push.
For instance, employment in agriculture has declined from over 12 million in 2012 to just over 10 million this year (down about 16 percent), while employment in construction has increased about 84 percent during the same time period (2.1 million to 3.8 million.
“This also means a shift from rural to urban areas where most of the construction projects are centered. The higher incomes and increased availability of goods and services in urban areas should also bode well for overall consumption,” HSBC said.
The bank said the slower expansion in private consumption in the third quarter, which grew by just 4.5 percent compared with its long-term trend of around 5 percent, was primarily due to idiosyncratic factors such as the sharp fall in remittances in September and the high consumption base from the previous year.
