The Philippines is benefitting from a period of political stability with economic growth accelerating. The country’s GDP significantly grew to 7.8% in 1Q 2013, above the market consensus of approximately 6.0%. This was the highest in the region, exceeding China (+7.7%), Indonesia (+6.0%), Thailand (+5.3%), India (+5.0%) and Vietnam (+4.9%), among others.
The stellar GDP growth in the first quarter was highly attributed to the increase in government and consumer spending, as well as the robust performance of the manufacturing and construction industries. Strong domestic expenditures led the manufacturing sector to grow by 9.7%, while investments in construction grew by double digits for the fourth consecutive period translating into a 32.5% increase in 1Q 2013.
Consumer spending remains the main growth contributor, comprising approximately 80% of the quarter’s total GDP. Consequently, strong local demand will be continually buoyed by benign inflation (3%), all time low lending rates (5-8%), and the sustained inflow of OFW remittances, which reached US$6.9 billion (+5.7%) from January to April of this year.
Meanwhile, the recent investment upgrades from S&P and Fitch have led to a heightened level of interest among foreign investors and a more upbeat business and consumer sentiment. Due to this healthy business climate backed by a solid macroeconomic environment, the majority of economists expect the country’s GDP to grow between 6.5 and 7.0% in 2013, up from the previous projections of 6.0%. However, the recent quantitative easing in the U.S. might signal an increase in domestic interest rates which will possibly hamper growth moving forward.
Source: Colliers International
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