SUPERTYPHOON Yolanda (international code name Haiyan) is likely to reduce the country’s economic growth. In the latest edition of Market Call, the First Metro Investment Corp. (FMIC) and University of Asia and the Pacific (UA&P) Capital Market Research group, however, pointed out that the reconstruction efforts could offset the loss on output and income due to the typhoon’s negative effects.
“The world’s biggest-ever typhoon, which packed over 300-kilometer-per-hour winds and huge waves, flattened and killed thousands of Filipinos in the eastern coast of some Visayas islands, may now mean below 6-percent gross domestic product [GDP] growth in [the fourth quarter] and the first half of 2014,” the group said.
“To be sure, reconstruction efforts could offset the loss on output and income due to the negative effects of the super typhoon, but the affected areas reportedly represent some 12 percent of the country’s population, and the latter would probably tilt the balance,” it added.
The FMIC-UA&P Capital Market Research group said Yolanda wiped out some of the expected gains of the economy, as indicated by the Leading Economic Indicators (LIE) for the fourth quarter.
The National Statistical Coordination Board (NSCB) earlier said the LEI accelerated to 0.181 in the fourth quarter of 2013, from a revised 0.046 in the previous quarter. The estimate was made prior to the onslaught of Yolanda.
“This acceleration, which goes back to Q4 [fourth quarter] 2012, promises continued satisfactory performance of the country’s economy until the end of the year, but now tempered by Supertyphoon Yolanda’s negative impact,” the group said.
BDO Private Bank, a subsidiary of BDO Unibank, expects a modest growth in the economy of 6.5 percent next year, while interest rates are seen to gradually increase. Senior Vice President and Deputy Trust Officer Jose Noel Mendoza, head of capital market research, said the GDP growth forecast for this year is 6.75 percent and expects a moderate increase of 6.5 percent in 2014.
“The Philippines is expected to grow 7.5 percent this year, unfortunately, because of Yolanda, the range of growth forecast was revised to 6.5 percent to 7 percent, still above government target,” he said. Fourth-quarter GDP forecast is at 3 percent to 4 percent.
“The local interest rates were likely to increase by 50 to 75 basis points next year,” he added.
He said in the Asian region, the serious challenge faced by Asian bankers is the high total debt to GDP of most developed countries.
Data also showed that apart from growth, Yolanda might also increase the country’s inflation rate to reach the low end of the government’s target of 3 percent by year-end. This may be driven by higher inflation in the last three months of the year, expected to hit 3.3-percent inflation rate in the fourth quarter. The group added that inflation averaged 2.4 percent in the third quarter, on account of a slower increase in crude-oil prices. The report noted inflation increased to 2.9 percent in October, from 2.7 percent in September.
Amid the negative impact of these factors on growth, the group expects overseas Filipino worker (OFW) remittances to soften the impact of the super typhoon on the economy.
The group said OFW remittances will be a positive factor for the economy in the second semester due to the depreciation of the peso, and should continue to do so unto the fourth quarter.
“If the private sector is indebted, you have to reduce the leverage. One way of reducing that leverage is to increase interest rate because you want to slow lending on the private-sector side,” BDO’s Mendoza said. “We’re not saying crisis is imminent. There’s still time to make structural reform, but that could mean the growth within the region will slow dramatically because the private-sector indebtedness will have to deleverage in the next few years.”
He issued a warning that the rising private-sector indebtedness could trigger the next wave of Asian financial crisis in the next five years.
He cautioned companies with high leverage or gearing ratios, particularly those exposed to US-dollar liabilities and mismatched with local currency revenues.
Executive Vice President Stella Cabalatungan of the relationship management group said the BDO’s assets under management target are to hit P280 billion next year, up from the P240-billion target by end of the year.
Net income is expected to reach P1.2 billion this year, up from last year’s P514 million, on higher fee income.
In Photo: People march in the rain in Tacloban during a procession on Tuesday to call for courage and resilience among Supertyphoon Yolanda’s survivors. Countless families lost loved ones and hundreds of thousands of survivors continue to endure unimaginable suffering. Even now, blackened bodies with peeling skin still lie by the roads or are trapped under the rubble. But as the crisis eases and aid begins to flow, hope flickers, people smile, if only briefly, and joke, if only in passing. (AP)