WHILE KEEPING PH GROWTH FORECAST AT 6.1%

S&P warns of external, domestic political risks

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Debt watcher Standard & Poor’s (S&P) Global Ratings has kept its 6.1 percent growth forecast for the Philippine economy this year, but warned that downside risks may come from outside factors coupled with current political uncertainties in the country.

S&P’s projection is within the 6 percent to 7 percent gross domestic product (GDP) growth target of the government, and higher than the 5.8 percent expansion in 2015.

“Economic and demographic fundamentals continue to drive a strong domestic demand story, as indicated by nearly 7 percent growth in the first half of the year,” it said in a report released Tuesday.

The credit rating agency said the Duterte administration’s economic policies appear sound, targeting higher infrastructure and education spending, among others.

“However, international investors may be getting worried about potential diplomatic complications and short-term law and order issues on the ground,” it said, pointing out that the peso has been one of the region’s weakest performers since June.

S&P said the underlying demographic trends will drive Philippine economic growth around 6.5 percent over the next few years, despite significant headwinds from sluggish external demand.

“The growing and increasingly educated middle class, combined with a booming outsourcing industry, continues to boost consumption and investment,” it said.

However, the debt watcher noted the main downside risks to the Philippine economy continue to come from external factors, such as a sharper-than-expected downturn in China or repeated bouts of market turbulence.
“Recently, tail risks from local and regional political issues have appeared as well,” it said.

Earlier, HSBC, Metrobank Research, and Bank of the Philippine Islands (BPI) said they are keeping their previous economic projections for year. HSBC and Metrobank kept their forecasts at 6.3 percent and BPI at 6.2 percent.

On the contrary, the International Monetary Fund (IMF) as well as other banks and think tanks have revised upward their full-year growth estimates for the Philippines. The IMF said it will mostly likely be revising up its 6 percent growth forecast for the Philippines in the next round of revisions.

Fitch-owned BMI Research upgraded its forecast to 6.9 percent from 6 percent; Japanese investment bank Nomura and London-based consultancy firm, Capital Economics raised their forecasts to 6.7 percent – Nomura from 6.3 percent and Capital Economics from 6.5 percent.

Singaporean DBS Bank revised its forecast from 6.3 percent to 6.6 percent; Swiss banking giant Credit Suisse from 6.2 percent to 6.5 percent; and global financial services firm J.P. Morgan to 6.4 percent.

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