FIRST Metro Investment Corp. (FMIC), the investment arm of Metrobank, has joined a growing chorus of analysts and institutions in adjusting its GDP growth forecast for the country upward, seeing strong investment and public and private consumption expanding the economy by as much as 7 percent in 2016.
FMIC on Monday said the Philippine economy would expand by 6.5 percent to 7 percent until the end of this year, higher than the investment firm’s previous forecast of 6.0 percent to 6.5 percent GDP growth.
FMIC joined banking giants Standard Chartered, DBS, and HSBC, US-based think tank
IHS, debt-watcher Standard & Poor’s Global Ratings, Nomura Global Economics, and London-based consultancy Capital Economics in raising its growth outlook.
The investment banking firm said the Philippines would maintain its steady growth until the end of the year and still be one of the highest performers in the region.
FMIC’s latest projection is within the 6 percent to 7 percent revised growth target of the government.
Strong economic fundamentals, election-related spending, increased investment-led domestic demand, steady consumer spending from money poured in by overseas Filipino workers (OFW) and the business process outsourcing sectors, stronger government spending, and the overall high optimism for the new leadership of President Rodrigo Duterte were identified as growth drivers by FMIC.
“We remain optimistic about the performance of the Philippine economy for the rest of the year. With the anticipated 6.5 percent to 7 percent GDP growth, the country is expected to continue its rapid growth, outperform its regional peers, and weather any further global economic and financial market headwinds,” FMIC President Rabboni Francis Arjonillo said during a press briefing on Monday.
The country’s fiscal position remains healthy, he added, while prevailing monetary policy that has been supportive of growth will continue even after the change in government leadership, Arjonillo added.
In addition to the latest GDP growth forecast by FMIC, several other analysts and financial institutions have recently adjusted their earlier forecasts upward. Last week, Standard & Poor’s Global Ratings raised its 2016 forecast by 0.1 percent from 6.0 percent to 6.1 percent, while banking giant HSBC provided an even more optimistic adjustment, raising its Philippine growth outlook from 5.9 percent to 6.3 percent.
With the new forecast of FMIC, the consensus GDP growth rate among analysts and banks according to The Manila Times’ calculation has increased from 6.03 percent to 6.32 percent, well inside the government’s revised target range of 6.0 percent to 7.0 percent for 2016.
Among other economic indicators assessed by FMIC, inflation was forecast to average at 2.0 percent to 2.2 percent for the full-year 2016, mainly due to the slight recovery of world oil prices and the lingering effects of the recently-ended El Niño on food prices.
OFW remittances are expected to maintain a positive growth of about 2.0 percent to 4.0 percent but will continue to be tempered by the impact of oil prices, particularly in the Middle East, FMIC said.
Exports are also only projected to improve marginally, growing at 2.0 percent to 5.0 percent, but may continue to reel due to weak global economy, it added.
On the other hand, imports are expected to grow by 7.0 percent to 10 percent this year, driven by robust domestic consumption and investment demand.
In terms of the foreign exchange rate, FMIC said the peso will be trading between P46.50 to $1 and P47.50 to $1 as a result of robust investment inflows, slightly stronger than the investment concern’s start of the year projection of between P48 and P49 to $1.
The exchange rate forecast was somewhat more optimistic than a forecast of up to P49 to $1 by Fitch-owned BMI Research over the weekend, which cited effects of the recent ‘Brexit’ and weakening of the Chinese yuan as sources of likely downward pressure on the local currency.
Finally, FMIC projects infrastructure spending to remain at 4.5 percent to 5.0 percent of government expenditures, assuming smooth and faster implementation of public-private partnership and other public infrastructure projects.
“With the change in government and the promise of the Duterte administration’s decisiveness and action, and an end to the most debilitating problems that the country has seen in the recent past, the country is poised to become an emerging global frontrunner,” FMIC’s Arjonillo said.