February 04, 2016 | Sharon Cheong
Back in the third quarter of 2015, the Philippines gained financial momentum by increasing public spending, rising fixed investment, and ensuring solid private consumption for the whole country. However, the industrial sector keeps dragging down the growth of the country, leading to ongoing weakness in the fourth quarter and 2016 as a whole thanks to a decline in the export sector. Demand for the ASEAN region has been low due in part to China's recession.
Domestic Economy and Other Anchors of Stability
Here's the financial outlook for the Philippines in 2016.
- Domestic Economy Remains on Solid Footing: Prospects remain positive for the Philippine Islands thanks to its solid footing as far as its local economy is concerned. This is because of its expanding Business Process Outsourcing (BPO) sector, its remittances inflows, and the support that its private consumption continues to acquire from the two aforementioned items.
- Government Support Goes a Long Way: The government's private partnership program should benefit investment and investors quite a lot. As for public spending, it's expected to pick up in 2016 thanks to the upcoming presidential elections in May. Essentially, the proper steps have all been taken when it comes to ensuring a positive economic forecast for the nation.
- IMF's Predictions for the Philippine GDP Growth: Even though the International Monetary Fund downgraded the growth outlook for the Philippines from 6.3 percent to 6.2 percent, it's still growth that's higher than the percentages of the country's ASEAN neighbors, signifying that the island nation remains one of the true survivors of the Chinese economic slump.
- The Reason for the Forest Downgrade: Although the Philippines is doing well than most countries in terms of economic performance thanks to its international sources of revenue and BPO demand, it's still affected by the region's sluggish performance and the slight recession in the global economy in general. It's not growing as well as it could in such circumstances.
- Public Spending Boost: The Philippine government continues to take the right steps in keeping its growth at optimum levels despite low demand in the region by giving a strong boost to public spending with its announcement that it would load up to 60 percent of the 2016 budget to this front.
- Continued Private Consumption Growth and Low Inflation: In 2016, Philippine investment and private consumption is expected to maintain its growth. There's unexpectedly low inflation so far for 2016, so inflation forecasts have been revised; in the first eight months, there should be an average of 1.7 percent inflation growth.
- Drops in Exports and Imports: Imports fell by 8.3 percent and merchandise exports fell by 12.9 percent. As for the trade deficit, it widened, but growth in services exports and remittances kept the current account in surplus overall. This is mainly from the tourism and BPO fronts of the country.
Overall Economic Prospects for Q1 2016
For the first quarter of 2016, it's assumed that global oil prices will have a slight increase while global food prices will remain stable, which is good news for the Philippines' continued economic growth. The El Niño drought, meanwhile, should induce upward inflation pressure if it ends up reducing hydropower supplies and damaging crops.
At any rate, Servcorp is a business that should assist in the stimulation of the Philippine economy, particularly in helping more local SMEs get into the BPO industry with its world-class virtual office and serviced office offerings all over the country. Please call +63 2 755 6500 for more information.