6.5% forecast matches Nomura’s; highest among analysts
Dutch financial institution ING Bank joined other analysts in raising its gross domestic product (GDP) growth forecast for the Philippine economy this year, citing higher government spending, buoyant consumption, and structural inflows as main drivers of growth.
ING Bank revised its GDP growth forecasts for 2016 upward to 6.5 percent from its previous outlook of 6.2 percent, according to the latest market views of ING Bank Manila senior economist Joey Cuyegkeng.
ING joined banking giants Standard Chartered and DBS, and US-based think tank IHS in raising its growth outlook, and its 6.5-percent forecast matched Nomura Global Economics and London-based consultancy Capital Economics for the highest growth forecast among the analysts polled by The Manila Times.
The Dutch bank sees Philippine GDP growth moderating to 6.2 percent in 2017.
ING’s projection was below the official 6.8 percent to 7.8 percent target of the government, but higher than the 5.8 percent growth in 2015. In the first quarter of 2016, the economy gained pace to 6.9 percent, driven in part by election-related spending.
Only the Economist Intelligence Unit (EIU), in a report released this week on the economy’s prospects under a Duterte presidency, sees Philippine growth losing pace this year, forecasting growth of “at least 5.0 percent” under what it considers the most likely scenario for the country after the political transition at the end of this month.
Cuyegkeng said the upgraded growth forecast was “on the back of higher deficit spending but still relatively affordable financing costs for the private sector, while consumer spending remains buoyant with structural inflow growing at an average rate of 9 percent this year and next year.”
ING believes that second-quarter GDP growth could accelerate further, while second-half growth moderate to an average of 6 percent, a pace that would continue into the following year.
“We anticipate that higher consumers’ incomes and purchasing power and higher government spending would keep growth at above 6 percent in 2017,” Cuyegkeng said.
Improvement in agriculture output in 2017 would also present some upside possibilities, he added.
Furthermore, ING also expects structural inflows like overseas Filipino workers (OFW) remittances are likely to remain resilient, although at lower growth rate than in 2015.
“We expect remittances to grow by an average of 3.5 percent to 4 percent this year.
Structural inflows (which include outsourcing revenues) are expected to post a 9 percent average growth this year from 2015’s almost 11 percent growth,” Cuyegkeng said.
“Improvement of remittances is possible with sustained stability in oil prices at around $40 to $50 per barrel,” Cuyegkeng said.
The ING economist noted that remittances remained resilient even after crude oil prices plummeted to multi-year lows early this year.
Oil prices have gained 70 percent since the lows early this year and could consolidate as global demand and supply dynamics improve, he stressed.
In addition, ING also said deployment of highly skilled workers and professionals have also contributed to remittances’ resilience.