MANILA, Philippines – Singapore-based DBS Bank Ltd. raised its growth forecast for the Philippines after election-related spending buoyed economic expansion in the first quarter.
In a report, DBS raised the country’s gross domestic product (GDP) growth forecast to 6.3 percent from 6.1 percent on the back of robust private consumption and strong investments.
“As far as the region is concerned, the Philippines remains one of the fastest growing economies, up there with India and China,” the investment bank said.
The country’s GDP expansion accelerated to 6.9 percent in the first quarter from the revised 6.5 percent in the fourth quarter of last year due to robust demand fueled by election-related spending as well as a strong pick up in investments.
“The first quarter data has hardly changed the fact that GDP growth has been running at a 6.3 percent trend since 2014, and we now expect 2016 GDP growth to be around 6.3 percent up from 6.1 percent previously,” DBS said.
The investment bank said the Philippines could post a seven percent GDP growth this year as investments recorded its strongest growth in five years after expanding 25.6 percent in the first quarter.
On the other hand, private consumption grew seven percent, its highest in three years, due primarily to election-related spending.
“Going by the first quarter number, seven percent seems to be within reach for the year. Given that there has been a frontloading of investment ahead of the May elections, however, we reckon there will be a moderation in growth momentum going forward,” it said.
Investment growth averaged an unprecedented 24.9 percent in the past two quarters. On a two-quarter average basis, the 2010 first to second quarter period was the only other occasion when investment growth was above 20 percent primarily due to the elections.
“The sharp spike in investment growth over the past two quarters is not sustainable,” DBS said.