Singapore finance firm raises PH forecast

International financial services firm DBS has revised its 2013 growth projection for the Philippines, citing the country’s low interest-rate environment, which is seen to drive consumption and investments the way it did last year.

From an earlier forecast of 5.3 percent, the Singapore-based firm now expects the Philippine economy to grow by 6 percent this year.

The new forecast falls within the government’s own target ranging from 6 to 7 percent.

“Positive momentum is expected to spill over to 2013, and we have revised up our GDP (gross domestic product) growth forecast… Notably, conditions remain very conducive for economic growth,” DBS said in its latest analysis of Asian economies.

Last year, the Philippines became one of the fastest-growing economies in Asia, with its annual rate of expansion settling at 6.6 percent.

This figure exceeded the government’s official target of 5 to 6 percent, as consumption remained strong, private investments increased, and public spending accelerated.

The financial services firm said the growth drivers in 2012 would continue to make a dent on the economy this year.

DBS said interest rates, which hit historic lows last year, would continue to remain benign.

As such, it added, demand for loans may continue to rise, further boosting consumption and investments.

DBS expects commercial interest rates to remain thin this year because the BSP will likely retain its low policy rates.

The regulator’s key monetary policy influences commercial interest rates.

“With inflation still low, there is no urgency for the central bank to raise interest rates, especially when [capital] inflows remain the primary concern. This will facilitate investments and consumption growth over the medium term,” DBS said.

Last year, the BSP reduced its key rates four times, each by 25 basis points. The rates still stand at record lows of 3.5 and 5.5 percent for overnight borrowing and lending, respectively.

As bank loans continue to be affordable, more priority infrastructure projects of the government, particularly those under the Public-Private Partnership (PPP) program, are expected to attract investors, DBS said.

It likewise said the elections in the middle of this year could provide an additional boost to the economy.

Exports may also perform somewhat better this year, DBS said, with the improvement in the economies of key markets.

“On the external front, exports should get a lift from stabilization in the major economies and acceleration in the Chinese economy,” DBS said.

Consumption will continue to be robust this year because remittances are expected to remain strong.

The money sent in by Filipino workers abroad helped fuel household spending, DBS said.

This year, the government expects remittances to grow by 5 percent.

Based on World Bank’s estimate, remittances to the Philippines hit $24 billion last year, making the country the third-biggest recipient of money sent in by migrant workers, next to India and China.

Read more...