Standard Chartered Bank’s (SCB) economic outlook remains positive for the Philippines, as it said that the country’s gross domestic product (GDP) could grow as high as 7.2 percent for this year.
“We expect the Philippines to achieve GDP growth of 7.2 percent in 2013, versus 6.9 percent in 2012 and 7.5 percent year-on-year in the first half of 2013,” the bank said in its latest Asia Regional Focus report titled “Clearing skies.”
The latest SCB growth projection for the country is higher than its 6.9 precent previous estimate in June. It is also above the 6-percent to 7-percent growth target of the government for 2013. For 2014, the bank also forecast a 6.7-percent expansion for the Philippine economy.
“Despite the expected slowdown in the second half, the growth trend remains strong. We expect quarterly GDP of 1 percent or more on a quarter-on-quarter seasonally adjusted basis in the second half,” it said.
SCB added that the country’s domestic consumption remains resilient, with the expectations of continued investment growth, “even as unfavorable base effects pull down headline prints.”
It also said that the country’s investment-grade status is boosting investment-led growth, but it is expecting export growth to bottom out, adding that it is expecting more public-private partnership projects to be implemented in 2014 and 2015.
To date, major credit-ratings agency such as Moody’s Investors Service, Fitch Ratings, Standard and Poor’s, Japan Credit Rating Agency Ltd. and Ratings and Investment Information Inc. have given the Philippines an investment grade rating. Meanwhile, the bank also mentioned that the country’s growth may become more evenly supported in the second half as external demand improves.
It noted that the positive United States semiconductor book-to-bill ratio in the first half points to improved demand for electronics exports in the second half, although recent declines indicate downside risks in 2014.
Non-electronics manufactured exports are gaining importance for the Philippines, despite a slight contraction this year resulting from a strong base effect, it added.
SCB also noted that services exports have also become more important, fueled by rising global demand for business process outsourcing.
It explained that services constituted 38.1 percent of total exports in the first half of 2013, up from 34.9 percent in 2012, and 9.6 percent in 2000.
“Domestically oriented sectors are likely to remain strong for the rest of 2013 and 2014,” it said.
The bank is also seeing positive developments on the major services sectors such as wholesale/retail trade, financial and business services, and the construction sector.
It added that manufacturing may also benefit from a government focus in the budget and a rebound in external demand, in line with recent industrial production trends. On the other hand, SCB said that it expects global economic activity to pick up for the remainder of 2013.
It said that China’s growth probably hit bottom in the first quarter of the year, adding “although a boom is unlikely, growth rates above 7 percent in China should be positive for the rest of the world.”
“It is worth emphasizing that Asian economies are still exposed to the US, although after seven years of sub-trend growth, medium-term prospects for the US economy finally look more positive,” the bank added.