Global banks raise PH growth outlook

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CITING better quality in terms of economic development, global lenders have raised the Philippine growth outlook for 2016 since the country posted a 7.1- percent output expansion in the third quarter.

Japanese investment bank Nomura, UK-based Barclays and HSBC are forecasting a 6.8 percent to 6.9 percent growth for the whole of 2016, or at the upper end of the government’s 6 percent to 7 percent target.

The better-than-expected gross domestic product (GDP) in the third quarter underscores its view that the quality of growth is improving, Nomura said over the weekend.

“Given that year-to-date GDP growth has averaged 7 percent, we are raising our 2016 GDP growth forecast to 6.9 percent from 6.7 percent,” it said, implying an output growth of 6.5 percent in the fourth quarter.


Investment spending and construction activity are likely to boost the medium-term potential, the investment bank noted.

Despite the political noise from President Rodrigo Duterte’s controversial rhetoric, Nomura expects the government to make more progress when it comes to infrastructure spending and boost reforms, particularly by cutting red tape and implementing comprehensive fiscal changes.

“The continued strength in domestic demand will provide significant buffers against downside risks from external factors, including the impact of President-elect [Donald] Trump’s proposed policies,” it added.

Barclays, on the other hand, revised its 2016 forecast to 6.8 percent from 6.6 percent “as an accommodative monetary stance and an expansionary fiscal stance should continue to support growth.”

On the regulatory front, it expects no policy shifts for some time as a rate hike would only be likely if growth remained elevated around current levels with inflation moving high enough to justify a rate increase.

“Although there are rising uncertainties at a global level, we think the Philippines’ strong external position and low level of short-term debt provide the BSP [Bangko Sentral ng Pilipinas] with enough policy space to maintain an accommodative stance,” it added.

HSBC also tweaked its 2016 GDP forecast to 6.8 percent from 6.5 percent, noting that the 7.1-percent third quarter expansion points to the resilience of the economy in a soft global growth environment.

However, it said the election of Donald Trump introduces some risks to growth due to the possibility of protectionist policies. “The biggest risk comes from the BPO [business process outsourcing]sector, which employs approximately 1.2 million Filipinos and earns roughly 70 percent of revenues from the US.”

But the risks are manageable and more limited than elsewhere, it said. “We think risks are mitigated because there is little direct competition with American workers, and President Rodrigo Duterte appears to have struck a more conciliatory tone concerning future cooperation with the US.”

Earlier, ANZ Research, Credit Suisse, Fitch-owned BMI Research, and London-based research consultancy Capital Economics set aside any revision and left their full-year forecasts unchanged.

ANZ penciled in 6.4 percent, Credit Suisse 6.5 percent, BMI 6.9 percent, and Capital Economics 7 percent.

Multilateral lender Asian Development Bank (ADB) and International Monetary Fund (IMF) are set to revise upward the Philippine growth outlook to reflect the third-quarter results.

Both ADB and IMF have a 6.4-percent growth outlook for the Philippines.

The government said last week the economy only needs to grow by 3.4 percent in the fourth quarter to hit the low-end target of 6 percent, and by 6.9 percent to reach 7 percent.

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