MANILA, Philippines–The Philippines is likely to outperform consensus growth forecasts this year with the political and reform environment looking ripe for the implementation of more changes and the world economy appearing to be on the mend, New York-based think tank Global Source said.
But behind the surging confidence, the think tank said there were emerging questions about the sustainability of the economy’s growth as the unresolved crisis in the West meant that the country would have to rely on internal sources of growth.
In a Feb. 10 commentary dated “High on Snake Blood” written by economists Romeo Bernardo and Marie-Christine Tang, Global Source projected the Philippines gross domestic product (GDP) growth at 6.1 percent this 2013, upgrading its previous forecast of 5 percent. This upgraded forecast is more optimistic than the 5.6 percent consensus forecast based on FocusEconomics Consensus Economics albeit slower than the actual 6.6 percent attained by the country last year.
The slightly slower growth seen for this year factors in weak external growth and a strong local currency weighing down on exports.
For 2014, Global Source expects a growth of 5.8 percent versus the 5.7 percent consensus forecast.
“We hinge our higher-than-consensus growth forecast on the domestic macro policy environment continuing to be supportive particularly in terms of higher government spending, further expansions in private investments, and election spending aiding consumption growth,” the research said.
“Prevailing policies of easy money in advanced economies will again frame domestic monetary policy this year with the problem of capital inflows compounded by ‘risk on’ conditions in global financial markets,” it said.
But Global Source said a number of things could drag growth lower. It said the worst case would involve a sharper fiscal contraction in the US and deeper recession in Europe with China unable to pick up the slack due to internal excesses built up over the years. It added that tensions in the Middle East may again flare up reversing the forecast downtrend in oil prices.
“Internally, remaining bureaucratic bottlenecks may again stall government spending keeping a lid on investment ratios and souring investor moods,” it said.
But in the best case, it said the world economy would recover much faster and stronger than expected giving the local economy extra growth drivers through higher export sales and remittance growth.
The key will be investment and whether a combination of business optimism and record low interest rates will produce accelerated growth, the research said.