Tech exports to propel Philippine growth in H2 — Citi

MANILA, Philippines - Citigroup Inc. expects the Philippines to enjoy the third fastest economic growth in the Asia-Pacific region in the second half due to higher tech exports.

Johanna Chua, managing director and head of Asia Pacific Economic and Market Analysis at Citi, said the country is likely to book a gross domestic product (GDP) growth of 6.5 percent in the second half.

She pointed out only India with 7.5 percent and China with 6.8 percent growth rates are expected to outpace the Philippines in the region.

She added Vietnam is expected to register a GDP growth of 6.4 percent, Indonesia with 5.3 percent, Malaysia with 5.2 percent, Sri Lanka with 4.4 percent, Thailand with 3.5 percent, Hong Kong with three percent, Korea with 2.9 percent, Mongolia with 2.6 percent, Singapore with 2.5 percent, and Taiwan with 2.3 percent.

“Moving into the second half of 2017, the Philippines, a heavy exporter of chips, is expected to benefit from the tech cycle, with demand on the upswing,” Chua said.

The Philippines finished second only to outperformer Vietnam in tech exports in the first half ahead of Malaysia, Singapore, Thailand, North Korea, China, Korea, and Taiwan, according to Chua.

“The tech sector has been a very significant driver of overall exports in Asia, and is expected to stay resilient in the last semester despite a slower export growth momentum in the region,” Chua said.

Chua said Asia is expected to grow faster at 6.1 percent in the second half from 5.9 percent in the same half of last year on the back of resilient, tech export-led manufacturing sector and anticipated spending for capital equipment.

Chua said inflation is expected to average at 3.1 percent this year and 3.4 percent next year, well within the two to four percent target set by the Bangko Sentral ng Pilipinas (BSP) as oil price is expected to range from $50 to $55 per barrel.

The economist pointed out the BSP is now seen raising interest rates in the first quarter of being the first central bank in Asia to adjust policy rates this year.

According to her, the BSP is expected to raise interest rates four times for a cumulative increase of 100 basis points next year as the US Federal Reserve is expected to further raise interest rates in December after a combined 50 basis point hike in March and June.

Last Thursday, the BSP’s Monetary Board kept policy rates unchanged but vowed to pay close attention to the evolving economic growth and liquidity conditions and their implications for price and financial stability.

Citi Philippine country treasurer Paul Favila cited the plans of the government to overhaul its tax system and to increase its infrastructure spending.