Nomura hikes GDP growth for 2017, 2018

MANILA, Philippines -  Nomura Securities Co. Ltd. has upgraded the economic growth forecast for the Philippines over the next two years on the back of the strong rebound in the country’s merchandise exports.

Euben Paracuelles, economist at Nomura, said in its Asia Special Report titled “Philippines: Catching up,” the country’s gross domestic product (GDP) growth forecast has been adjusted upward to 6.7 instead of 6.3 percent for this year and to 6.8 instead of 6.5 percent for 2018.

This year’s growth for the Philippines is faster than Indonesia’s 5.6 percent, Malaysia’s 4.8 percent, Thailand’s 3.4 percent and Singapore’s 2.5 percent.

He said the upgraded forecasts for the Philippines took into account the improvement in electronics exports early this year.

“Electronics exports are catching up with the regional upcycle, which complements already strong domestic demand. We upgrade our 2017-18 growth forecasts,” he said.

Electronics export growth jumped 10.4 percent year-on-year following a 1.9-percent decline in the fourth quarter of last year.

Electronics shipments jumped 15.9 percent in February, driven by a surge in export volumes while price effects have been somewhat more subdued than in other members of the Association of Southeast Asian Nations (Asean).

By country, demand for Philippine exports seems to have picked up from all key trading partners so far this year, with the exception of Japan.

Paracuelles warned that a reversal of the current semiconductor-led pick up in the tech cycle could create a drag on headline export growth as electronics account for 50 percent of the total merchandise shipments.

He added the exports of electronics, machinery and equipment along with the business process outsourcing sector are vulnerable to the protectionist policies of the Trump administration.

However, the economist pointed out the Philippines is relatively insulated from a slowdown as exports of goods and services account for only 26.5 percent of GDP and domestic demand remains fairly strong.

“Although we forecast a moderation of the tech cycle in the second half of 2017 and a sharper downturn in 2018, we believe the economy will be relatively resilient, as the main engines of growth – private consumption and investment spending – continue to power on,” he added.

Economic managers of the Duterte administration penned a GDP growth of between 6.5 and 7.5 percent for this year from 6.9 percent last year due to robust domestic demand and higher investments.