London-based bank Standard Chartered (StanChart) lowered its gross domestic product (GDP) forecast for the Philippines in 2014, citing the slowdown of exports and higher electricity prices that would cause reduced consumer spending.
Steve Brice, chief investment strategist of StanChart, told reporters in a press conference on Friday that the Philippine GDP would likely “slow slightly” to 6.7 percent, compared to the 7.2-percent forecast for 2013.
The StanChart chief strategist said that the lower GDP growth would be caused by inflation accelerating modestly, leading to weaker consumer spending as well as lesser growth in exports.
“We’re expecting slowdown in consumer spending, with rising input prices. The rising electricity prices actually takes money away from other purchases that could have been made. We don’t expect it to be dramatic, but we expect it to have some sort of impact on consumer spending,” Brice told The Manila Times after the press conference.
“With the global recovery, export growth would be coming through, also the government reconstruction effort [mostly in Typhoon Yolanda-hit areas], infrastructure spending and increased investments generally as many comes to the country,” he said.
Brice added that better growth would be possible if infrastructure and construction activities were implemented faster.
He explained that with the increase in investments and infrastructure spending comes increase an in imports as well, providing a “balance” for the economy.
For inflation rates, the bank forecasted 3.9 percent this year from the 2.9 percent last year, and the Bangko Sentral ng Pilipinas’ (BSP) 4.5-percent forecast for 2013.
“We expect the BSP to start its hiking cycle in second semester of 2014 as inflation accelerates. We forecast that inflation will rise to a still manageable 3.9 percent in 2014 . . . reflecting buoyant domestic demand,” StanChart said.
With the peso possibly hitting P46 to a dollar, Brice said that StanChart projects that the peso would dwell at P43 a dollar in 2014 as the country’s fundamentals “are much better than any countries.”
“The central bank don’t really worry too much in the level of currency, but they worry in volatility . . . I really don’t see it extremely volatile [for this year],” he said.
For market equities, Brice said that the valuations would be “much more reasonable” for this year, and would stay on lower rates compared to the peak highs last year.
He also said that the reception toward the overall economic environment is “skeptical” and “positive,” and that the country’s economy is doing better, with GDP seen to possibly grow by 10 percent in five years.
On the world’s GDP, Brice said that the United States economic recovery will primarily boost the global economy this year, as high prospects were seen in capital expenditure and consumer spending.
The National Economic and Development Authority said that the government targets 6-percent to 7-percent GDP growth for 2013, and 6.5 percent to 7.5 percent in 2014.