6.8 percent expansion of Philippine economy

Metropolitan Banking Corp. (Metrobank) forecasts a 6.8 percent expansion of the Philippine economy for the fourth quarter of 2012 and 6.6 percent for the whole year.

The bank's full-year projection is higher than the government's five to six percent target growth, as measured by gross domestic product (GDP), for the year.

The government will release Thursday the official report on the 2012 fourth quarter and full year expansion of the domestic economy.

At the end of the third quarter last year, the economy grew by 6.5 percent while the third quarter growth stood at 7.1 percent, highest in the ASEAN and second strongest in Asia after China.

In a research note, Metrobank cited domestic consumption as among the major growth drivers of the economy.

"Domestic consumption is in turn largely underpinned by OFW remittances and the low inflation environment," it said.

Growth of inflows from overseas Filipinos grew by six percent year-on-year in the first eleven months of 2012, higher than the five percent target of the central bank.

The research note said the rise in the remittances is expected to boost growth of consumption spending by about five to six percent.

Another growth booster is government spending, which continue to rise and which the research note projects grew by at least 10 percent in the fourth quarter of last year.

The services sector, which continue to be among the strong growth driver of the economy, is expected to remain resilient.

"Growth in the industry sector is seen to come from the sustained expansion in construction activities in the fourth quarter," the report said.

The research note, on the other hand, said that this can be offset by the "modest growth in the agriculture sector on the back of lower crop production and the continued decline in the fisheries sub-sector."

Amid the generally positive outlook on the economy, the research note said that "while a report from the United Nations Conference on Trade and Development said that foreign direct investment flows to the Philippines outpaced the growth in other ASEAN economies, the support from investment spending is seen to remain modest amid still uncertain global economic prospects and financial strains in the advanced economies."