FROM 10 ANALYSTS POLLED BY THE TIMES

2017 GDP growth forecast at 5.8% to 7.5%

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Analysts tracking the performance of the Philippine economy have issued a wide range of forecasts for this year’s growth from 5.8 percent to 7.5 percent, with the average down from the rate recorded for 2016.

Their 2017 forecasts put the average at 6.6 percent, down from the 6.8 percent expansion achieved last year.

The analysts from 10 financial institutions polled by the Manila Times see headwinds coming from a regional slowdown, capital outflows triggered by investors positioning for higher interest rate prospects in the US, and heightened global policy uncertainty.

Four of the 10 analysts expect growth this year to surpass that of last year, but they were outnumbered by five others who said growth could moderate this year.


One exception is the International Monetary Fund (IMF), which said the rate in 2017 could stay at 6.8 percent.

The government has set an official target of 6.5 percent to 7.5 percent for 2017.

IMF keeps forecast
At the conclusion of its visit to the Philippines last week, the IMF said the economic outlook continues to be favorable, although subject to external headwinds.

The IMF projects 2017 growth to remain at 6.8 percent on continued strong domestic demand and a mild export recovery, but with a word of caution that the outlook is subject to downside risks, including lower regional growth, heightened global policy uncertainty, and capital outflows from other markets and into the US triggered by a Fed monetary policy tightening.

On the upside, support for Philippine growth could include a faster pace of budget execution and higher global growth, the IMF said.

“Fiscal policy is appropriately focused on the medium-term objectives of addressing the infrastructure gap and inequalities and should be supported by public financial management reforms,” it said.

Passing the first package of the comprehensive tax reform proposal is critical to sustaining the rise in expenditures targeted in the medium term fiscal framework, which is anchored on 3 percent of GDP deficit, it added.

The IMF also noted that Philippine monetary policy remains supportive of growth, while the introduction of the interest rate corridor has strengthened monetary transmission.

However, it suggested that the BSP remain vigilant to signs of an overheating or an undue acceleration of credit growth.

“Over the medium term, a continuation of sound macroeconomic policies and structural reforms would be important to sustain investor confidence and make growth more inclusive,” it said.

Lastly, the IMF said key reforms include those aimed at raising productive investment, opening up the economy to greater competition and foreign investment, and reducing poverty such as by removing the quantitative restrictions on rice imports.

Individual estimates
A private think tank composed of the University of Asia and the Pacific and First Metro Investments Corp. has the most optimistic view of 2017 for the Philippines, expecting growth to accelerate between 7 percent and 7.5 percent.

“With the domestic demand forces still in place in 2017 (up by 10.3 percent in 2016) and the global economy expected by the IMF to expand faster by 3.4 percent versus 3.1 percent in 2016, the external sector will likely rebound, and together with better agricultural output, should provide the booster for the economy to grow by at least 7 percent in 2017,” they said in a joint study.

The research arm of Metropolitan Bank & Trust Co. (Metrobank), meanwhile, sees 2017 growth at between 6.5 percent and 7.5 percent, hinging on the realization of the government’s infrastructure spending plans.

Metrobank Research said the multiplier effect that could result from the planned infrastructure spending would support GDP growth above the 7 percent level.

“The plans for massive infrastructure spending by the Duterte administration is seen further boosting investment spending growth. The sustained expansion in investment spending is expected to shield the domestic economy from negative externalities and form the backbone for a more inclusive growth,” it said.

Australia’s ANZ Research maintained its 6.9 percent growth forecast for 2017, believing that private sector activity would remain firm and complemented by higher levels of public spending.

“Since taking office in June 2016, the Duterte administration has fast-tracked the construction of projects that were previously approved. From our conversations with private sector entities involved in infrastructure development, we gathered that the construction of several transport links around the National Capital Region and Visayas received a boost in the last eight months,” ANZ Research economist Eugenia Victorino said.

Banking giant Standard Chartered Bank still sees GDP growth remaining strong at 6.7 percent, saying “strong domestic demand, increasing infrastructure investment and steady services-sector growth should support the economy in the near term.”

London-based research consultancy firm Capital Economics kept its growth forecast of 6.5 percent for this year, but warned that the downside risks have increased.

Capital Economic’s Gareth Leather said that in the near term, the economy should continue to record solid growth rates as relatively low inflation means the central bank is likely to keep interest rates low over the coming year, which will help support investment.

“Consumption should also do well, helped by buoyant sentiment and healthy household finances (unlike large parts of South East Asia, household debt in the Philippines is very low),” he said.

Keeping its 6.5 percent growth forecast, global bank HSBC said the Philippines will be one of the two countries in the Association of Southeast Asian Nations (Asean) that will top consumption and investment growth in the region this year.

“The Philippines and Vietnam will top the consumption and investment ranks,” it said.

This year, consumption in the Philippines is projected to grow 7.1 percent, which HSBC regards as impressive despite the slowdown from 2016, given that the 7.3 percent increase recorded last year was largely fueled by election-related spending.

For now, Singapore-based DBS maintains its 2017 GDP growth forecast at 6.4 percent, noting that the government’s strong intent in its infrastructure overhaul is key.

“It remains to be seen if the government can, indeed, bring infrastructure spending to 3.5 percent of GDP this year. Constructions outside the Greater Manila region would have a more significant (positive) impact on the economy, and thus, a close look on this front is warranted,” it said.

ING Bank Manila senior economist said GDP growth is likely to be slower at 6.3 percent in 2017, pointing out that while public construction would contribute to overall growth, the government’s infrastructure spending growth would moderate.

Providing the least optimistic view is German lender Deutsche Bank, reiterating its view that normalization would is likely to guide a slower pace of growth in 2017.

“Some upside to consumer spending can be expected from the recently approved pension increases for Social Security System beneficiaries and the planned salary increases for military and civil servants. But we are not keen to revise up our 5.8 percent growth outlook just yet given risks of private sector investment deceleration amid concerns over President [Rodrigo] Duterte’s controversial drug war and protectionist moves under a Trump-led US,” said Deutsche Bank economist Diana del Rosario.

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