Dutch financial giant ING has raised its growth forecast for the Philippine economy, citing the country’s unexpected resilience in the face of weak global demand—a trait shared by few other markets in the world today.
Most emerging markets may experience a slowdown in capital inflow over the next several months, but the Philippines is still expected to perform better than its peers due to strong consumer spending, ING said.
However, policymakers will need to sustain this rate of expansion to ensure that the millions of Filipinos still living below the poverty line also benefit from the country’s bright prospects.
“All economic indicators, excluding trade, are good, and this will drive growth,” ING Philippines chief economist Joey Cuyegkeng said Wednesday.
ING expects the Philippine economy to post a growth rate of 7.8 percent in the second quarter of the year, matching its first quarter numbers.
“We will still beat China by the skin of our teeth,” Cuyegkeng said.
China, Asia’s largest economy, grew by just 7.5 percent in the three months to June.
For the whole of 2013, growth is expected to clock in at 7.3 percent, higher than the previous forecast of 6.1 percent issued last February.
ING’s forecast is above the government’s own growth target of 6 to 7 percent for the year.
Cuyegkeng said remittances from migrant workers, which support domestic demand, and the increase in government spending would drive the economy forward this year.
So far, the Aquino administration has brought up the country’s average annual growth to around 6 percent, Cuyegkeng said.
He said this was better than the 5 percent average recorded under the past three presidents.
Citing the challenges now facing the country, he urged the development of the local agriculture sector and manufacturing industry, which will lead to more jobs in the countryside and healthy growth levels that actually reduce the incidence of poverty.
Also, economic developments abroad now threaten the flow of foreign capital to the Philippines, ING said, referring in particular to the US Federal Reserve’s eventual tightening of monetary policies.
Fortunately for the Philippines, the expected foreign capital flight, brought on by the Fed decision, may be offset by the entry of P1.4 trillion into the country’s financial system. The amount will be drawn from the Bangko Sentral ng Pilipinas’ special deposit accounts. Cuyegkeng said this would benefit local businesses by reducing their borrowing costs.