Weak RP growth a 'wake-up call'

“The slower growth, in our view, also helps inject a dose of realism into the overly bullish growth expectations that many fear will lead to asset bubbles and cloud prospects for sustained expansion over a longer horizon,” said Romeo Bernardo and Marie Christine Tang, economists at New York-based think tank Global Source.

In contrast to equity traders who had sold stocks on the news, Global Source said in its latest research that the first-quarter GDP report – albeit much lower than the market consensus of 6.4 per cent – was “not bad at all” as the Philippines was still the third fastest-growing economy in the region even with the lingering destructive effects of last year’s natural disasters.

Global Source was keeping a GDP growth outlook of 6.1 per cent for the Philippines this year but noted that downside risks could come from the severity of some new developments, including the Manila City truck ban, the El Nino dry spell and other infrastructure constraints, especially power.

“We are also on alert to any negative impact that the pork barrel scandal may have on public spending, especially after the budget secretary [Florencio Abad], who has been spearheading reforms to increase the transparency of budget processes and quicken disbursements, was included among the hundreds of former and present lawmakers implicated by the alleged mastermind of the scam [Janet Napoles], tagging him as being the real mastermind who mentored her,” Global Source said.

“While we find this simply bizarre, even by Philippine political tragicomedy standards, there is still the risk that a major misstep in handling the scandal will cost the administration invaluable political capital necessary to keep business confidence up in the short term [and even beyond 2016],” the think-tank said.

While debt service in the public and private sectors had shrunk significantly over the years, Bank of the Philippine Islands (BPI) economist Emilio Neri Jr said very little of the funds spared for meaningful spending capital – such as airports, seaports, power plants, national highways, roads, bridges, post-harvest facilities, irrigation, crop technology for agriculture and manufacturing productivity – had been mobilised.

“We hope these numbers will be a wake-up call for both the government and the private sector about how little our economy has taken advantage of the scope to spend, given the very affordable financing available in the local financial sector,” Neri said.

BPI, one of the country’s biggest banks, is still expecting a full year growth of 6.2 per cent for the Philippines, much faster than its peers.

However, following the first-quarter GDP report, Citi pared down its 2014 GDP growth forecast for the Philippines to 6.7 per cent from 6.9 per cent but retained the 2015 growth outlook of 7.3 per cent.