British banking giant HSBC has upgraded its Philippines growth outlook for this year and the next, but warned that the country may be rocked by external pressures.
Across Asia, HSBC is cautious about its expectations, noting that China’s engine may take a couple of years to rev up again. This means that Korea, Hong Kong and Taiwan, in turn, may be stuck in low gear.
While improving demand from the United States, European Union and Japan may help the region, the impact may be smaller than what was seen in the past.
The Association of Southeast Asian Nations (Asean) “will continue to deliver robust, even if slightly less stellar growth,” HSBC said in its special report, “Asia’s Bitter Medicine,” which it issued Friday.
The bank upgraded its 2013 gross domestic product growth forecast for the Philippines from 5.9 to 6.4 percent, which is lower than that of most analysts. Among them, they believe that the economy will grow 6.6 percent. For next year, HSBC slightly raised its forecast from 5.4 percent to 5.5 percent, which is also below the 6.1 percent consensus.
In the chapter on the Philippines written by economist Trinh Nguyen, the report pointed out that while the Philippines managed to fend off the impact of sluggish global growth in 2012 and in the first quarter of 2013, the country is “not yet in the clear.”
Nguyen said that “external headwinds are intensifying, especially with weakness from China and persistent pessimism in the euro zone.”
She pointed out that the expenditure composition in the first quarter suggested that private consumption had decelerated due to weaker inflows of remittances and the contraction of net exports. But the economy grew by 7.8 percent year-on-year on the back of higher government spending and resilient customer spending.
With an abundant food supply and low global commodity prices, Nguyen said inflationary pressures had been contained.
However, she noted that April export growth had contracted due to weak demand globally, especially from China.
“This means that growth will be increasingly domestic-led. Remittances are expected to be robust thanks to a resilient demand for Filipino workers. Government spending will also step in to support domestic demand,” she said.
For the remainder of the year, HSBC is expecting a healthy increase of government expenditure of around 10 percent.
“Monetary policy will also … help. Main policy rates are expected to stay steady for the remainder of the year. The [special deposit account] rate will also stay put for the time being,” she said.