Analysts’ outlook for 2015 GDP mostly unchanged

Growth seen lifted by H2 election spending


Despite the sharp slowdown in gross domestic product (GDP) rate in the first quarter of 2015, most analysts are leaving their economic growth forecasts for full-year 2015 unchanged, seeing a good reason for the government economic planners’ optimism for the second half.

On the day the government released GDP growth of 5.2 percent on Thursday for the first quarter, the slowest pace since the fourth quarter of 2011, the country’s economic managers said they believe the official 7 percent to 8 percent assumption for full-year growth is still on track.

Socioeconomic Planning Secretary Aresenio Balisacan, on Thursday after the release of lower-than-expected first-quarter GDP rate, said delivering an average 7.5 percent growth for the next three quarters is not impossible because that has been achieved in the past.

Citing the country’s favorable macroeconomic fundamentals and low inflation, oil prices and interest rates, he said,  “I’m not giving up, because I think the target is still within reach.”

Analysts from the Bank of the Philippine Islands (BPI) likewise kept their growth forecast for 2015 steady, although lower at 6.5 percent, saying that government spending is likely to recover in the second half of the year.

They said it is still too early to count out a 6.5 percent growth outlook for the economy.

“We believe that aggressive public spending is just being pushed back to the second half of 2015 to improve the chances of candidates getting elected in 2016,” the BPI report said.

UK-based investment bank Barclays also sees the economy growing by 6.5 percent this year, but qualified its forecast by saying this hinges on the capacity of the economy to rebound by the second quarter.

“We maintain our 2015 growth forecast at 6.5 percent with downside risks should we not see a significant rebound in the second quarter,” they said.

Global think tank BMI Research said that while the Philippines’ real GDP growth slowed to 5.2 percent year-on-year in the first quarter from the revised 6.6 percent in the fourth quarter of 2014, it still expects strong domestic demand to provide a measure of support for the economy.

BMI Research analysts are keeping their forecast of a lower rate of 6 percent growth unchanged for the Philippines but warn that a slowdown in exports may pose downside risk.

“While growing export headwinds stemming from cooling regional demand will continue to place downward pressure on the Philippine economy, we, nevertheless, expect resilient domestic demand to cushion the negative impact of an ongoing slowdown in export growth,” the BMI Research report said.

“As such, we maintain our forecast for the Philippines’ real GDP growth to come in at 6 percent in 2015,” the analysts were quoted as saying.

DBS likewise sees 6 percent a more likely rate for the 2015 economic expansion, adjusting its forecast downward from a previous projection of 6.3 percent.

The DBS analysts said Philippine GDP growth is unlikely to deviate too much from 6 percent as long as private consumption and investment remain robust.

“There are good reasons to expect these conditions to [be]sustained. Consumer price index (CPI) inflation is currently trending below 3 percent. The peso has been doing relatively well against its regional counterparts. Foreign workers’ remittances are still set to hit a record-high of $25 billion this year. And the government’s infrastructure overhaul is ongoing,” they said in a report.

Analysts at SB Equities Inc., the equities brokerage a rm of Security Bank Corp., said the “disappointing” first-quarter performance has compelled them to revisit their 2015 GDP estimate.

“We are already seeing regional weakness in GDP numbers over the past 12 months. As the external environment is likely to soften in the coming quarters, we have tweaked our FY15 GDP target from 6.7 percent to 6.4 percent,” they said.The analysts said their earlier expectation that the government would ramp up its spending has yet to materialize–at least judging by the first-quarter data.

“We assume that as elections approach and as the current administration’s term comes to a close, government spending should accelerate. In fact, we have observed the same pattern in the past five years: underwhelming expenditure,” they added.

Going forward, the analysts said the pace of fiscal spending is the key determinant whether GDP growth will be 6.5 percent, at 6 percent or below 6 percent this year.

“It is always a long stretch to meet the government’s 7 percent [to 8 percent]target for 2015 but GDP growth circa 6 percent still puts the Philippines as one of the fastest growing economies in the region,” the DBS analysts concluded.


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