After the Philippine economy surpassed expectations and posted 7.1 percent growth in the third quarter, economists from ANZ Research, the Fitch-owned BMI Research, and London-based research consultancy Capital Economics set aside any revisions and left their full-year forecasts unchanged.
They had forecast growth for 2016 of between 6.4 percent and 7 percent.
ANZ said the economy is clearly on a firm footing to weather financial market volatility on the back of continued consumer spending and firm household consumption.
“Looking ahead into the fourth quarter, sustained strong fiscal spending will continue to be supportive of growth. We are penciling in GDP growth of 6.4 percent year-on-year in 2016 and 6 percent in 2017,” the ANZ analysts said in a note.
BMI economists said the third-quarter data reinforces its view that the Philippine economy will continue to outperform on the back of an ongoing investment boom in the country.
“Although there are lingering uncertainties regarding [President] Duterte’s foreign policy direction, we believe that Manila’s friendly overtures toward Beijing and Tokyo should be positive for growth as it is likely to facilitate investment and trade flows with two of the largest economies in the region,” they said.
BMI maintained its real GDP growth forecast of 6.9 percent for 2016, and 6.3 percent for 2017.
Another economist sees a much less certain outlook Despite acknowledging that the foundations for growth to remain strong are in place, citing as reasons the recent political events, both in the US and on the domestic front.
In the short term at least, economist Gareth Leather said Capital Economics expects GDP to continue growing at a decent pace with subdued inflation, good prospects for consumption and strong fiscal position.
“Meanwhile, low debt levels and a current account surplus mean the country is well-positioned to weather any negative shift in investor sentiment,” Leather said.
For the medium term, Capital Economic’s outlook has become much less certain following the election of Donald Trump as the next US President.
“While it remains to be seen if Trump will follow through on some of his more protectionist policies, if he did, the repercussions for the Philippines would be significant. The Philippines’ booming business outsourcing sector, which has benefited hugely from US investment, would also be hit hard by any attempt to bring back jobs to the US,” Leather warned.
He stressed that the Philippine President himself continues to unnerve investors with a series of controversial comments and erratic foreign policy changes.
“With Duterte in charge it is hard to rule out a sudden shift in economic policy or a disruption of the political stability that has characterized the last six years. Either it would cause sentiment to sour and growth prospects to weaken,” the economist said.
Leather said while the firm is keeping its GDP growth forecasts of 7 percent for this year and 6.5 percent in 2017 unchanged, the risks are now firmly on the downside.
‘No need to adjust policy’
Bangko Sentral ng Pilipinas Governor Amando Tetangco Jr. said the third-quarter GDP rate of 7.1 percent puts the government comfortably within the full-year target range for growth.
“With the inflation outlook over the policy horizon also seen as manageable and within the government target range, there is really no need to make further adjustments to monetary policy levers at this time,” he said in a text message.
Finance Secretary Carlos Dominguez 3rd said the third-quarter GDP puts the Duterte government on target for expanding the economy by at least 7 percent in the short and medium term, to generate enough resources for its priority agenda of drastically reducing poverty and creating enough jobs for Filipinos.
Spending on infrastructure and the recovery of the agriculture sector from the prolonged El Nino-induced drought have contributed significantly to the third-quarter performance of the economy, he said.
Dominguez said there will be no letup in the Duterte administration’s commitment to spend big on urban and rural infrastructure as a growth driver, as well as on human capital and social protection, to guarantee sustained high – and inclusive – growth.
He stressed that the government needs to move quickly on its fiscal reform package—topped by the proposed Comprehensive Tax Reform for Acceleration and Inclusion Act that the Department of Finance (DOF) already submitted to the Congress in September—to create enough buffer that would shield the economy, plus the poor and other vulnerable sectors, from market volatility which is mainly triggered by external factors.
“To keep the economy on its high—and inclusive—growth path, the government will pursue with vigor its fiscal strategy of improving budget efficiency and transparency and reforming tax policy and administration,” he said, “as a way to raise the P1 trillion in additional annual investments that are needed in infrastructure, human capital and social protection to transform the Philippines into a high middle-income economy by 2022 and a high-income one by 2040.”