Steady consumption to continue to bolster PH GDP growth in 2015

Amid a sharp decline in inflation.

The Philippines’ GDP growth continues its stellar performance, after a stronger-than-expected 6.9% (YoY) showing in 4Q14.

According to DBS, a turnaround in government spending, almost 10% growth in 4Q14, proved to be the key difference after the contraction seen in 3Q14.

Export growth was robust, at 15.5% (YoY) in 4Q14, mainly driven by the strong showing in electronics and electrical components.

Here’s more from DBS:

We reckon that 2015 will be a more challenging year for export growth, given the current state of the global economy. Repeating another double-digit growth in exports looks unlikely for this year, although we expect export growth to remain very close to 10%.

Other than the anticipated increase in government spending, we think that consumption growth may also surprise on the upside this year. Falling inflation is a big factor on this front. Inflation has fallen quite sharply in the past couple of months, amidst falling utility prices on lower crude oil price. Additionally, the peso looks relatively more stable this year, compared to the other regional units. And this could be in favour of consumer sentiment throughout the year. We now see 2015 GDP growth at 6.3%.

As far as how the central bank will look at its monetary policy setting, expect little changes. If anything, the central bank remains a tad concerned about liquidity in the financial system. Barring further fall in crude oil price, look for no change in the policy rate in the immediate future.