Analysts trim growth forecasts for PH

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2015 growth range seen at 5.5% to 6.2%
Most analysts have revised downward their full-year growth estimates for the Philippine economy, sharing the government’s view that achieving its 2015 target of 7 percent to 8 percent expansion would now be a challenge.

Following the release late last week of a 5.6 percent expansion in gross domestic product (GDP) in the second quarter, which dragged the economy’s first-half performance to 5.3 percent from 6.2 percent a year earlier, the country’s chief economic planner said the government is likely to scale down its growth target this year.

Despite seeing stronger government spending pumping up the economy in the second half of 2015, five out of seven analysts who have released new 2015 outlooks after last week’s data, trimmed their growth projections for the full year, citing weak exports and uneven global growth as risks.

Analysts from the Bank of the Philippine Islands (BPI), Metropolitan Bank and Trust Co. (Metrobank) Research, Singaporean bank DBS, London-based research consultancy firm Capital Economics, and United Kingdom-based investment bank Barclays expect the year’s growth in GDP in the range of 5.5 percent to 6.2 percent.


BPI lowered its 2015 growth forecast to 6.2 percent from 6.5 percent after seeing the 5.3 percent first-half print.

“Possible drags on growth momentum will be the El Niño and slower trade on global growth concerns,” BPI lead economist Emilio Neri Jr. said, although he added the Philippines is still seen leading Association of Southeast Asian Nations (Asean) growth, boosted by election spending.

Neri sees the Philippines remaining one of the few bright spots in the region, expecting growth to gain speed in the second on sustained robust domestic demand and ramped-up government spending.

Metrobank Research’s new forecast for full-year GDP average growth is 6 percent, a downward revision from its previous estimate of 6.4 percent.

“Risks to the domestic economy remain amid the effects of the El Nino phenomenon, uneven global economy and the impact of the financial market [on growth],” Metrobank Research analyst Pauline Revillas said.

Revillas expects the service and industry sectors to post solid growths in the coming quarters, while the agriculture sector remains weak amid soft food prices and the impact of the El Nino phenomenon.

The Metrobank Research analyst, however, pointed out that higher government spending in the second half could sustain growth in investment spending and further boost consumption spending.

DBS cut its growth forecast to 5.7 percent from 6 percent, after seeing the 5.3 percent GDP improvement in the first half.

“Looking ahead, downside risks to GDP growth remain prevalent, mainly on the external front,” DBS analysts said in a note.

Despite this, they said faster GDP growth is still possible in the second half of 2015, given the anticipated acceleration in fiscal spending.

“Depending on the eventual pace of fiscal spending for the rest of the year, 6 percent GDP growth is still not to be ruled out,” the note said.

Capital Economics also shaved its growth forecast to 5.7 percent from 6 percent, although it stressed that the forecast has factored in a further recovery over the coming quarters on the back of improving exports.

“Conditions in the domestic economy look healthy, and continued recovery in exports should help drive a further pick-up in growth over the coming quarters,” said Capital Economics senior Asia economist Daniel Martin.

Martin said exports should make a further recovery over the coming quarters as the global economy gains momentum, while his team expects government spending to become an important growth driver over the forecast period.

Investment is also likely to remain buoyant on the back of low interest rates and an improving business environment, while prospects for private consumption are healthy, particularly in the near term, given that the drop in inflation has boosted real income growth, he added.

Barclays has revised its our growth forecast for 2015 down to 5.5 percent, from 6.5 percent.

“The risk from weather conditions remains, but so far, inflation has remained manageable,” said Barclays economist Rahul Bajoria.

Bajoria added, however, despite the cut in its growth forecast, Barclays expects the Philippines to continue to outperform the other Asean economies, with the country set to be the fastest growing economy in the region for a third consecutive year in 2015.

BMI, StanChart retain forecasts
Analysts from Fitch Group’s think tank BMI Research and Standard Chartered Bank have chosen to keep their 2015 GDP outlook unchanged.

“While external headwinds will continue to pressure Philippine exports over the course of the second half of the 2015, we expect an acceleration in government disbursements for infrastructure projects to act as a significant tailwind to economic activity through the end of the year,” BMI analysts said in a research note.

Standard Chartered Bank, meanwhile, said the Philippines is on track to grow 5.7 percent as the domestic economy remains solid.

“The Philippines’ household consumption outperformed that of other Asean economies over the past four to five years. Investment, or gross fixed capital formation, also grew consistently over the period, second to only Malaysia’s in the region,” said StanChat economist Jeff Ng.

Going forward, Ng said improving labor market fundamentals, remittances and services exports should remain supportive of the domestic economy.

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