HSBC, S&P see robust Philippine GDP growth in 2 years

MANILA, Philippines -  The Hong Kong and Shanghai Banking Corp. Ltd as well as S&P Global Ratings expect a healthy economic expansion for the Philippines in the next two years despite the diplomatic crisis in the Middle East and the terrorist attack in Marawi City.

Fan Cheuk Wan, managing director and head of investment strategy and advisory for Asia at HSBC, said in a press conference the Philippine market would continue to benefit from strong domestic growth story.

“We anticipate GDP growth to hold firm at 6.5 percent this year and next year, a moderate deceleration from the 6.8 percent mainly due to the expected current account deficit due to strong import growth driven by the significant investment in infrastructure investment,” she said.

According to Wan, imports would continue to outpace export growth which could result in current account deficit this year. HSBC expects imports to grow 11.4 percent while exports are projected to rise at a slower pace of 6.5 percent.

Economic managers decided to keep its GDP growth target at a range of 6.5 percent to 7.5 percent for this year despite a slower growth in the first quarter.

Weak private consumption pulled down the GDP growth to 6.4 percent in the first quarter from 6.6 percent in the fourth quarter of last year.

HSBC sees inflation accelerating to 3.6 percent this year, double the 1.8 percent average recorded last year due to higher infrastructure spending by the government.

“The domestic demand growth story is the key. Of course investors will closely follow up on the political development and these are the tail risks that we highlighted earlier,” she added referring to the ongoing war against the Maute Group in Marawi City that prompted President Duterte to declare martial law in Mindanao last May 23.

HSBC sees the Bangko Sentral ng Pilipinas (BSP) keeping its accommodative monetary policy stance this year due to the benign inflation environment.

In its latest Asia Pacific economic snapshots, S&P expects a 6.6 percent growth for the Philippines this year and 6.4 percent for 2018.

“Strong domestic demand will continue to drive a solid GDP expansion at around 6.5 percent annually over the next two years,” S&P said.

The rating agency sees inflation rising to 3.1 percent this year and 3.6 percent next year from 1.8 percent due to higher increments for food and non-food items.