The Asian Development Bank (ADB) has upgraded its growth forecast for the Philippines to 7 percent this year from an earlier projection of 6 percent, as booming investment and consumption continue to underpin an “economic renaissance” in the country.
On the other hand, debt-watcher Standard and Poor’s (S&P) also revised its growth forecast for the Philippines this year. In its latest report titled “After the Financial Crisis, Is Asia-Pacific An Export-Lighter, Credit-Heavier Model?,” S&P said that the country is seen to grow up to 7.1 percent in 2013. S&P’s September forecast for the Philippines was higher compared to its earlier estimate of 6.9 percent.
“Bucking the regional trend, this economy accelerate in the first half of the year and doubled its current account surplus,” the Manila-based lender said in the updated assessment of its “Asian Development Outlook 2013.”
The latest ADB forecast is at the higher end of the 6-percent to 7-percent gross domestic product (GDP) growth target of the government this year. The Philippine economy accelerated by 7.6 percent in the first semester of 2013.
The lender added that from the “stellar” first-half performance of the country, its growth momentum is expected to moderate this year, while for 2014, ADB noted that the country may grow 6.1 percent from its previous projection of 5.9 percent. The Philippines is the only country in Southeast Asia where ADB lifted its growth forecast for this year.
“Signs are positive for continued growth in consumption and investment,” it said, adding that investment is likely to maintain solid growth, supported by positive business sentiment and expansion in credit.
Risks to the outlook posed by global financial market volatility are mitigated by the country’s strengthening economic fundamentals, it added.
Recent financial jitters sparked by expectations of a wind-back of the United States Federal Reserve’s quantitative easing operations have raised concerns about the impact of an exodus of foreign capital from emerging markets. The lender mentioned that the Philippines is well placed to withstand any volatility with its current account firmly in surplus and foreign exchange reserves remaining high.
It added that the country’s external debt as a share of GDP has been on the downtrend since 2003, and 84 percent of it is medium to long term.
“Inflation is low, and investor sentiment was bolstered by this year’s award of investments grade rating,” it said.
The ADB continued that external debt as a share of GDP is also on a downtrend and the banking sector is healthy, with strong capital adequacy ratios and low levels of nonperforming loans. Meanwhile, the lender revised down its 2013 GDP growth forecast for the Asia and the Pacific region to 6 percent from 6.6 percent seen in April.
For 2014, the region’s growth is now projected at 6.2 percent from 6.7 percent in April.
It said that softer than expected economic activity in China and India, and jitters over the United States quantitative easing program will weigh on Asia and the Pacific’s growth prospects in the near term.
For Southeast Asia, the ADB said that growth will be crimped by the soft performances of its three biggest economies, with lackluster exports and moderating investment weighing on Indonesia, Thailand and Malaysia.
“By contrast the Philippines is expected to continue to perform strongly. The sub-region will grow 4.9 percent in 2013, with the pace set to quicken to 5.3 percent in 2014, as it benefits from an investment recovery and firmer exports, supported by improved global trade and recent currency depreciations,” it stated.