MANILA, Philippines–Standard Chartered Bank, the oldest foreign bank in the Philippines, sees the country sustaining a pace of growth above 7 percent this year and next year on the back of strong private consumption and investment growth.
In a research note issued on June 10, Stanchart economists Jeff Ng and Edward Lee said they were expecting “sustained and more broad-based growth to help the country achieve middle-income status and structural development.”
Stanchart is optimistic that Philippine gross domestic product (GDP) growth would be sustained at 7.1 percent this 2014, versus 7.2 percent in 2013. Next year, GDP growth is seen at 7 percent before easing to 6.3 percent by 2016.
The bank said it’s expecting both the domestic and external sectors to continue to prop up local growth. “Private and commercial motor vehicle sales are likely to remain robust, pointing to strong private consumption and investment growth,” the study said.
Infrastructure spending grew close to 50 percent year on year in the first two months of this year. The bank said a continuation of this trend would provide an upside to public investment growth.
Stanchart also sees scope for further upgrades of the Philippine sovereign credit rating after Standard & Poor’s surprise upgrade in the rating to BBB—one notch above minimum investment grade—from BBB-last May. This in turn was seen further boosting investor optimism.
The foreign bank said export growth had remained positive, even as a ban on trucks in Manila during peak hours was lengthening the time it takes to process trade.
On the negative side, Stanchart said the unemployment (7 percent in April) and underemployment rates have remained high.
Meanwhile, the bank sees the Bangko Sentral ng Pilipinas raising its overnight borrowing rate in the second half particularly as inflation hovers in the upper half of its target range. The overnight borrowing rate is seen to rise to 4 percent from the end of the year, 50 basis points higher than the current level.–Doris C. Dumlao