DBS hikes Phl growth projection to 6.2% this yr

MANILA, Philippines - Singapore-based DBS Ltd. raised its Philippine economic growth projections for this year and the next following other institutions’ moves after a strong 7.1 percent economic expansion in the third quarter.

The local economy is now expected to grow 6.2 percent this year and 5.3 percent in 2013, up from the original projections of 5.7 percent and five percent, respectively.

Last Wednesday, the National Statistical Coordination Board (NSCB) reported the economy expanded by 7.1 percent from July to September this year, the fastest pace in Southeast Asia. This brought the average growth for the first three quarters to 6.5 percent.

Following the report, a five to six-percent growth goal has been retained for this year by the government, which also forecast expansion could actually hit between six- to seven-percent.

“This set of numbers is particularly impressive considering that many other Asian economies have been showing signs of slowdown amid ongoing external headwinds,” the investment bank said.

“Critical to the country’s economic resilience is resurgent domestic demand which have more than offset the external drag,” it added.

DBS said cuts to policy rates made by the Bangko Sentral ng Pilipinas (BSP) earlier in the year also made their way to the economy and helped it to remain buoyant amid challenging times.

“Accordingly, this also implies that further monetary easing is unlikely,” it said.

BSP policy rates, which banks used as benchmarks for bank interest loans, are at their record lows of 3.5 percent for overnight borrowing and 5.5 percent for overnight lending. Lower interest rates are expected to spur bank lending, which in turn, should boost consumption and investment.

“Elevated business confidence has also been reflected in the robust investment growth rate… over the last three quarters. An improved budget disbursement process is also clear from the government consumption numbers,” the bank said.

This was reflected on the construction sector, DBS said, noting a double-digit rise on the indicator from a slump in same period last year. NSCB data showed construction growth hit 24.8 percent in the third quarter alone.

On the trade front, DBS said exports have diversified from electronics sector, allowing shipments to grow 6.9 percent in the third quarter.

Moving to the next year, the economy could find its boost from higher spending as a result of the senatorial elections, it said.

DBS’s forecasts revisions followed that of other institutions. For instance, another investment bank, Barclays Capital, also revised upwards its Philippine economic growth projection to 6.2 percent this year from the original 5.5 percent originally.

Citi Research, on the other hand, sees a 6.3 percent expansion from five percent initially. Metropolitan Bank and Trust Co. and Nomura Singapore Ltd., meanwhile, forecast a 6.6 percent growth.