HSBC report: PHL fundamentals ensure resiliency of the economy

By Joann Santiago

MANILA, Jan. 9 IPNA) — Hongkong and Shanghai Banking Corp. (HSBC) considers a sustained growth for the Philippine economy for the whole of 2014 despite a slowdown in the first three quarters.

In its Global Research report dubbed Asian Economics Quarter: Can’t this thing go any faster?” Released Friday, the banking giant said growth is forecast to be at 5.7 percent.

HSBC economists noted that “at the fundamental level, the Philippines has plenty of demand growth” due to a large number of youth as well as rising population.

The report cited a United Nations (UN) projection that there will be about 150 million Filipinos by 2050, way higher than the current 100 million.

UN projects that bulk of the population by that time will be of working age instead of dependents, thus, they would be assets for the domestic economy.

“The Philippines favorable demographic transition coupled with high poverty incidence means that demand for food, shelter, and infrastructure is rising,” the HSBC report said

These factors made HSBC economists optimistic on the growth of the domestic economy citing that private consumption “is the most resilient component of GDP (gross domestic product) as well as the most stable even in comparison to its Southeast Asian neighbors.”

The report said private consumption is primarily driven by the inflows from Filipinos overseas, which is among the major drivers of the economy for decades now.

Amidst this situation, the bank also noted that “there is a limit to consumption-oriented growth, especially when income growth channels are limited.”

HSBC said gross fixed capital in the country grew by only 4.9 percent on average since 1999, lower than the five percent assumption for depreciation of capital.

Also, government spending is not growing as programmed, partly due to the questions about the implementation of the disbursement acceleration program (DAP) as well as the Priority Development Assistance Fund (PDAF).

Despite these issues, HSBC is confident that investments will help buoy the domestic economy since these have “exceeded the trend rate in recent years.”

”But we believe its pace will likely decelerate in the coming quarter,” it noted and it attributed this to delay in the awarding of the projects included in the public-private partnership (PPP) initiative.

The government has earlier traced the delay in the awarding of the PPP projects to more stringent bidding and awarding rules.

On the other hand, the below-programmed government spending is seen to be countered by the increase in bank lending, which in turn is supported by the Bangko Sentral ng Pilipinas’ (BSP) mandate of ensuring price stability and inflation-targeted framework.

”The hope is that lending will offset the decline in fiscal spending,” it added. (PNA)