Standard Chartered Bank cut its growth forecast for the Philippine economy this year to 5.7 percent from a previous projection of 6 percent largely on account of the slowdown in China’s economic performance.
StanChart’s forecast is slower than last year’s 6.1 percent expansion in Philippine gross domestic product (GDP), and falls below the 7 percent to 8 percent growth assumption for 2015 by the government.
Persistently weak external demand may limit the strength of the rebound in GDP growth, StanChart said in its “Global Focus” report.
“As China’s economy continues to slow, this may adversely impact the Philippines’ export growth,” the investment bank warned.
The bank explained that the Philippines has become more reliant on exports to China and Japan over the past 15 years, shifting from a reliance on the United States and the European Union.
China now accounts for almost half of the Philippines’ exports, with growth jumping from a rate of just 5 percent in 2000.
Growth to pick up in H2
On a positive note, StanChart said it expects a pick-up in growth momentum in the second half of 2015 after the first quarter’s weak performance.
“Steady domestic demand, increased government spending and limited additional downside to external demand should support faster growth,” it said.
The bank stressed that domestic household expenditure in the country is likely to receive support from an improving labor market.
The unemployment rate, according to the April results of the Labor Force Survey, has dropped to 6.4 percent from 7 percent a year earlier. Underemployment has eased to 17.8 percent from 18.2 percent in the same period in 2014. Total employment grew 1.3 percent year-on-year in April, which means an additional 495,000 Filipinos were able to find jobs during the period.
On investment growth, StanChart sees an upside on the back of increased infrastructure investment.
The “Aquino Administration aims to accelerate progress on the PPP [Public-Private Partnership] projects before its term ends. So far, 10 such projects have been approved since 2010, and around 15 are in the final bidding stages,” StanChart said.
Lastly, the bank said the government’s plan to accelerate spending in the months ahead should provide additional support to growth.
Government spending in the first four months of the year showed only a 5 percent increase to a total of P660.6 billion from P626.1 billion a year earlier.
Failed expectations in Q1
Earlier, Moody’s Investors Service trimmed down its 2015 growth forecast for the Philippines to 6 percent from 6.5 percent, citing bottlenecks in the government’s budget execution.
The Singapore-based DBS Bank and SB Equities Inc., the equities brokerage arm of Security Bank Corp., also made downward adjustments to their Philippine GDP projections for 2015.
DBS cut its growth forecast to 6 percent from a previous projection of 6.3 percent, while SB Equities reduced its GDP expectations to 6.4 percent from 6.7 percent.
The International Monetary Fund (IMF) had said it was set to review its 6.7-percent Philippine growth outlook for the full year to consider the impact of the weakerthan-expected GDP performance of 5.2 percent in the first quarter.