S&P maintains PH growth forecast

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S&P Global Ratings is keeping its full-year growth forecast for the Philippines at 6.4 percent, noting that the second-quarter result released last week was within expectations.

“GDP (gross domestic product) growth remained strong at 6.5 percent in Q2, in line with our estimate of potential growth,” the debt watcher said in a report released on Tuesday.

S&P’s 2017 forecast falls short of the government’s 6.5-7.5-percent target and represents a slowdown from last year’s actual GDP growth of 6.9 percent.

The Philippine economy grew by 6.5 percent in the second quarter, picking up from the 6.4 percent recorded in the first three months of the year but down from the 7.1 percent posted a year earlier.


Year to date growth, at 6.4 percent, remains below target.

S&P said consumption and investment remained the Philippines’ main growth drivers and were a testament to solid demographic trends that were benefiting the country.

“We expect strong domestic demand to drive solid GDP expansion over the next few years…,” it added.

S&P said inflation remained benign and was even declining, but it maintained the view that consistently strong growth would likely lead to a shift in bias toward monetary policy tightening in the second half of 2017.

The ratings agency said that external factors were still the main source of risks — be it rising protectionism overseas, geopolitical tensions or uncertainty in financial markets that could lead to capital outflows.

Still, “[t]he tail risk of a spill-over of tension and fighting in the south (between government forces and extremists) appears to have receded significantly,” it noted.

Other forecasts
Earlier, banking giant Standard Chartered Bank also retained its 6.5 percent forecast, saying the Philippines will be the fastest-growing Asean-6 economy this year/

“Strong domestic demand and steady services sector growth will likely remain the primary growth drivers; better implementation of planned infrastructure investments might drive even faster growth,” it said.

The bank, however, said that infrastructure spending would have to pick up significantly for GDP growth to edge closer to 7 percent.

“While the government remains committed to spending more on infrastructure, actual expenditure remains subdued for now,” it said.

Japanese financial giant Nomura has also retained its 6.7-percent growth forecast, forecasting a pickup to 6.9 percent in the second half from 6.4 percent in the first half.

“We continue to expect government spending to accelerate given the administration’s strong push to implement public sector infrastructure projects and avoid past problems of underspending. More progress on infrastructure projects should continue to crowd in private investment,” it said.

Singapore’s DBS also said it does not see a compelling need to adjust its 2017 forecast of 6.4 percent.

IHS Markit, for its part, said the Philippine economy will maintain rapid growth for 2017 calendar year, growing by 6.4 percent year-on-year.

Revisions
Credit Suisse and Australia’s ANZ Research, meanwhile, have revised their 2017 growth projections for the Philippines.

Credit Suisse raised its forecast to 6.1 percent from 6 percent but noted that it expected growth to moderate in the second half.

“Driving this forecast is our view that private consumption will begin to weaken due to an unusually weak labour market,” it said.

ANZ Research for its part cut its estimated 6.5 percent from 6.9 percent.

“Despite the slowdown in private consumption growth, strong investment and the improvement in exports will remain supportive of growth. However, we are increasingly cautious of the quality of growth if real estate and construction continue to drive activity,” it said.

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