Nomura raises PH growth forecast to 6.7%


Nomura Securities Co. Ltd. raised its Philippine economic growth forecast by 0.4 percentage point for the year, as it expects shipments in electronic products to recover and complement a robust investment spending.

Its latest estimate placed the gross domestic product (GDP) at 6.7 percent, compared with a previous forecast of 6.3 percent.

“[W]e are raising our growth forecast for the Philippines by 0.4 percentage point to 6.7 percent, because, in addition to stronger investment spending, more than half of its exports are in electronics, which are beginning to catch up with the rest of the region,” it said in a report released over the weekend.

The government has placed it growth estimates between 6.5 percent and 7.5 percent. The economy grew by 6.9 percent last year.


“Electronics exports are catching up with the regional up-cycle, which complements already strong domestic demand,” Nomura said.

Until January 2017, there were few signs the Philippines was benefitting from the electronics export up-cycle, when electronics export growth jumped by 10.4 percent year-on-year following a 1.9 percent decline in the fourth quarter of 2016, according to Nomura, a leading securities and investment banking company in Japan.

Shipments of electronic products accelerated to 15.9 percent in February, driven by a surge in volumes while price effects have been somewhat more subdued than in other Association of Southeast Asian Nations (Asean) countries.

“By country, demand for Philippine exports seems to have picked up from all key trading partners so far this year, with the exception of Japan,” the report said.

Nomura noted that more than 70 percent of electronics exports semi-conductors and other components, so a reversal of the current semiconductor-led pick- up in the tech cycle should nonetheless create a drag on headline export growth, with total electronics exports comprising over 50 percent of total exports.

Shipments of electronics, machinery and equipment (along with its business process outsourcing sector) are vulnerable to protectionist policies from the United States, the company said.

But exports of goods and services account for only 26.5 percent of GDP and domestic demand remains fairly strong, so the economy is relatively insulated, it said.

“Although we forecast a moderation of the tech cycle in second-half 2017 and a sharper downturn in 2018, we believe the economy will be relatively resilient, as the main engines of growth—private consumption and investment spending—continue to power on,” Nomura said.

“In addition, we now expect stronger investment spending as the public sector is clearly pushing the implementation of more projects which is likely to crowd in private investment spending,” it added.

Other forecasts

Earlier, the International Monetary Fund (IMF) retained its Philippine growth forecast to 6.8 percent this year, citing strong domestic demand, exports recovery and higher public spending as growth drivers.

The World Bank is forecasting GDP to grow by 6.9 percent this year, supported by ongoing infrastructure projects, strong consumption, buoyant remittance inflows and higher receipts from services exports.

Manila-based lender Asian Development Bank retained its previous 6.4-percent outlook with public and private investments as growth drivers.

Banking giant Standard Chartered revised upward its GDP growth forecast to 6.8 percent from 6.7 percent, expecting strong household spending and infrastructure investment to provide strong support similar to 2016.

IHS Markit penciled in 6.3 percent, citing the information technology-business process outsourcing industry and remittances from overseas Filipinos as growth engines.

German lender Deutsche Bank revised its 2017 growth outlook to 6.2 percent from 5.8 percent on account of stronger-than-expected exports.


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