More banks upgrade Philippine growth forecasts

MANILA, Philippines - More investment banks are upgrading the country’s economic growth prospects after a stronger than expected gross domestic product (GDP) expansion in the second quarter.

David Mann, managing director and chief economist for Asia at Standard Chartered Bank (SCB), said the bank now expects the country’s GDP to grow faster at 6.8 percent instead of 6.4 percent this year and to 6.7 percent instead of six percent for 2017.

“Consumption has been relatively robust,” Mann said.

He said there is a lot of positivity under the Duterte administration because of its commitment to pursue the reforms undertaken by the previous administrations and further liberalize the country’s economy.

The country’s GDP growth accelerated to seven percent in the second quarter from the revised 6.8 percent in the first quarter on the back of a strong boost from election related spending.

This brought in the first half of the year to 6.9 percent from 5.5 percent in the same period last year.

Weak global demand and the lack of government spending under the previous administration pulled down the GDP growth to 5.9 percent last year from 6.1 percent in 2014.

The Development Budget Coordination Committee (DBCC), slashed the GDP growth target this year to a range of six to seven percent instead of 6.8 to 7.8 percent as it intends to boost infrastructure spending.

To achieve this, the Duterte administration raised the budget deficit ceiling to three percent of GDP instead of two percent of GDP under the previous government.

On the other hand, DBS Bank Ltd of Singapore raised the country’s GDP growth forecast to 6.6 percent instead of 6.3 percent this year as the impact of the May elections turned out to be more significant than earlier expected.

“The domestic economy is firing on all cylinders,” DBS said.

The investment bank said the country’s GDP would have grown in excess of 10 percent in the first half if the slumping exports were excluded from the GDP equation.

DBS sees the country’s GDP expansion to moderate in the second half of the year.

Investment growth has averaged 26.5 percent in the last three quarters as against the 17 percent growth in 2012 and 2013.

However, excess capacity remains in the economy as optimism continued to linger in the private sector while the government has committed to ramp up infrastructure spending.

“Combined, all these suggest that any overheating risk is manageable for now. Indeed, the rebound in loan growth this year has also been indicative of a supportive underlying demand as well as liquidity in the banking system,” the bank added.