Local lender Metropolitan Bank & Trust Co. (Metrobank) has revised its 2017 Philippine growth forecast to 6.6 percent, down from the previous projection of above 7 percent, but said the economy remained on solid footing despite a first quarter slowdown.
“For 2017, Research sees full-year average growth to come in at 6.6 percent,” Metrobank’s Research Department said a new report.
The revised 2017 forecast — within the government’s 6.5 percent to 7.5 percent target — represents a slowdown from last year’s actual gross domestic product (GDP) growth of 6.9 percent.
The Philippine economy grew by 6.4 percent in the first quarter of the year, down from 6.9 percent a year earlier and the 6.6 percent recorded in the last three months of 2016.
“While the first quarter growth was lower than market expectations, it still showed that the economy is on a solid footing as growth still came in above the 6 percent level,” the bank said.
It said full-year growth would be supported by still solid remittances, a second semester pickup in government and investment spending, a rebound in the agriculture sector, and a robust services sector.
“The first-half fiscal performance of the government bodes well for the economy, with the deficit numbers so far lending credibility to the government’s spending plans and could likely translate to average GDP growing around the 6 percent to 7 percent level,” it added.
The Duterte government aims to spend P847 billion this year on infrastructure to meet a target infrastructure spending-to-GDP ratio of 5.3 percent.
Metrobank also said consumption spending would stay positive as the value of overseas Filipino worker remittances would increase amid a stronger US dollar.
Money sent home by overseas Filipinos rose to $2.58 billion in May, bringing inflows for the first five months of the year to $12.61 billion, up 5.2 percent a year earlier.
“The agriculture sector is seen to continue its recovery this year, while the services sector will continue to post positive expansions,” the bank also said.
Nevertheless, Metrobank pointed out that risks remained given still diverse global economic growth and financial market volatilities.
The bank cited a recently released International Monetary Fund report that said that while short-term risks were broadly balanced, medium-term risks remained tilted to the downside.
With regard to advanced economies, the bank said 2017 growth projections for the euro area had improved amid stronger domestic demand momentum. Sustained pickups in activity are also expected for emerging economies on the back of an upturn in global trade and strengthening domestic demand, it added.
Metrobank noted that renewed political uncertainty, such as post-Brexit negotiations and United States regulatory and fiscal policies, could very well impact confidence, investments, and economic growth.
Furthermore, monetary policy normalization in some advanced economies, especially the US, could trigger a faster-than-anticipated tightening in global financial conditions.
Metrobank’s move to cut its Philippine growth forecast was in line with other downward revisions.
Earlier this week, Standard Chartered Bank trimmed its 2017 growth forecast for the Philippines to 6.5 percent from 6.8 percent.
Credit Suisse has also reduced its growth forecast to 6 percent from 6.4 percent, saying it expected private consumption to moderate.
The World Bank has trimmed its 2017 forecast to 6.8 percent from 6.9 percent, also on account of the slowdown in the first quarter.
ANZ Research, meanwhile, has kept its forecast at 6.9 percent, saying overall growth was strong and balanced.
Capital Economics noted the economy was likely to continue growing at a solid 6.5 percent, while DBS and IHS Markit maintained their forecasts at 6.4 percent.
First Metro Investment Corp. and the University of Asia and the Pacific also maintained their GDP growth forecast, at 7 percent this year.
The Asian Development Bank , for its part, raised its forecast to 6.5 percent for 2017 and 6.7 percent for 2018.