JP Morgan cuts growth forecast for PH

American financial services giant JP Morgan Chase has tempered its 2014 economic growth forecast for the Philippines after first-quarter results fell below expectations and turned out to be the slowest pace of expansion in 10 quarters.

In a commentary dated May 30, Singapore-based JP Morgan economist Benjamin Shatil said the group was now expecting a more modest gross domestic product (GDP) growth of 6 percent for the Philippines this year, down from the previous forecast of 6.6 percent.

The economist added that the Bangko Sentral ng Pilipinas was not likely to sanction another increase in the reserve requirement on banks, now at 20 percent of deposits and deposit substitutes, but noted that policy rate increases could not be ruled out later this year.

On sovereign credit-rating, JP Morgan said more upgrades would likely come at a gradual pace after Standard & Poor’s “sooner than expected” upgrade in the government’s credit-rating to “BBB” or one notch below the minimum investment grade.

S&P’s upgrade was attributed to strong fiscal and balance-of-payments figures alongside expectations that reforms undertaken during the Aquino administration would endure beyond 2016, when a new president would be elected. Shatil noted that this was the first time that a rating agency had publicly given the Philippines such a vote of confidence.

“The Philippines has been the most upgraded sovereign credit in the region in recent years and its rating will likely move up further. But significant rating constraints remain, mainly the government’s narrow tax base and low revenue generation and the country’s low income per capita,” Shatil said.