Barclays keeps Phl growth forecast at 6.5%

MANILA, Philippines - The strong inflows of remittances in August should continue supporting domestic consumption, but UK-based investment bank Barclays said it still sees this year’s economic growth decelerating to 6.5 percent from 2013 levels.

“Stable and sustained growth in remittances should continue to support domestic consumption. We maintain our 2014 GDP (gross domestic product) growth forecast at 6.5 percent,” the bank said in a research note.

Cash remittances climbed six percent to $2.053 billion in August, bringing the eight-month figure to $15.538 billion. Barclays said the expansion rate was in line with market expectations.

The Bangko Sentral ng Pilipinas cited the sustained strong demand for Filipino workers abroad as the main driver of the robust remittance inflows.

Bulk of cash remittances were sent from the United States, Saudi Arabia, the United Arab Emirates, the United Kingdom, Singapore, Japan, Canada, and Hong Kong during the eight-month period. Those that came from land-based workers went up 5.2 percent to $11.8 billion, while those remitted by sea-based workers rose eight percent to $3.7 billion.

Remittances provide a big support to the domestic economy as it fuels household consumption.

In 2013, cash remittances alone made up 8.4 percent of the country’s gross domestic product. The economy then grew a stellar 7.2 percent from an already faster-than-expected 6.8 percent in 2012.

The BSP hopes to grow remittances by five percent this year over last year’s $22.968 billion.

Philippine economic expansion accelerated to 6.4 percent in the second quarter from a disappointing 5.6 percent in the first quarter. However, the government kept its 6.5-to-7.5 percent target for full-year economic growth.