Two of the foreign banks with the largest operations in the Philippines upgraded their economic growth forecasts for 2013 after the country beat market expectations and outperformed the rest of its Southeast Asian peers in the second quarter.
American banking giant Citigroup revised its 2013 gross domestic product (GDP) growth forecast to 7.3 percent from 7 percent previously while the outlook for 2014 growth was also adjusted to 6.9 percent from 6.8 percent, based on the latest research written by Citi economist for the Philippines Jun Trinidad.
In a separate report, British banking giant HSBC jacked up its 2013 GDP forecast to 7.1 percent from 6.4 percent, with Hong Kong-based economist Trinh Nguyen expecting a recovery in global demand to boost exports and remittances in the fourth quarter.
“The Philippines remains one of the world’s economic bright spots,” Nguyen said in a research note issued after news that the Philippine GDP grew by 7.5 percent in the second quarter, making it the fastest-growing economy in Southeast Asia and matching China’s pace of growth.
The HSBC economist said the growth data released Thursday had shown that the momentum was strong despite a drag from net exports, thanks to robust investment spending and private consumption.
“A recent improvement in fiscal and monetary policy management has reduced the external debt burden, contained inflation and created more scope to support growth. In addition, the savings made thus far will make space for much-needed infrastructure spending, allowing the country to take advantage of its favorable demographic transition,” Nguyen said.
“The Philippines has been caught in the rush as investors exit emerging markets. But in our view it should not be lumped together with economies which are overly reliant on foreign funding to support the current account deficit and growth. The current account and the balance of payments are in surplus and we expect this trend to continue over the next two years,” she added.
Trinidad, for his part, said that following the first-half growth of 7.6 percent, Citi was expecting “slower but still strong” growth of 7 percent for the second half of the year.
“Base effects, modest export gains in the fourth quarter 2013, financial volatility due to (US Federal Reserve) taper risk, which could impact investments and delayed PPP (public-private partnership-funded infrastructure projects) all assure us of upbeat but less robust growth,” Trinidad said.