Philippine economy could grow up to 6.5% – S&P

MANILA, Philippines - S&P Global Ratings expects the Philippine economy to grow between six and 6.5 percent over the near term after a smooth transition of power to the Duterte administration.

In a report, S&P said the underlying demographic trends in the Philippines would continue to drive growth at six to 6.5 percent.

S&P said the country’s GDP is expected to expand 6.1 percent this year, 6.3 percent next year, and 6.2 percent in 2018.

The economic managers of President Duterte lowered the GDP growth target to a range of six to seven percent instead of 6.8 to 7.8 percent.

The country’s GDP growth slowed to 5.9 percent last year from 6.1 percent in 2014 due to weak global demand and low government spending.

“A growing and increasingly educated middle class continues to be absorbed by a combination of overseas employment and a booming outsourcing industry, driving domestic consumption and investment,” S&P said.

On the economic policy front, the rating agency also cited administrative efficiency, anti-corruption, infrastructure, and openness to foreign investment that remain key parts of the Duterte administration’s agenda.

According to S&P, the main downside risks to the Philippines all come from external factors.

It pointed out exports are fairly exposed to China’s slowdown relative to its Southeast Asian neighbors while repeated bouts of market turbulence could dampen investor confidence.

“On the geopolitical side, territorial disputes with China and other neighbors remain tense,” S&P said.

S&P’s has assigned a BBB rating for the economy while Moody’s Investors Service pegged the country’s rating at Baa2. Both ratings are one notch above the minimum investment grade.