Pouring more concrete to improve the state of the Philippines’ hard infrastructure should remain the government’s top priority in the coming year to ensure that growth will be sustained in the coming year.
Southeast Asia’s largest bank, Singapore’s DBS, said the groundwork that would allow the economy to perform better remained in place. Tax collections continue to increase and domestic demand remains strong.
“The bigger challenge is to ensure sustainable growth in the long-term,” DBS economist Gundy Cahyadi said in a note.
For 2015, DBS sees the Philippine economy growing by 6.2 percent, versus the government’s target for the year of at least 7 percent. Chances of hitting this year’s growth target of at least 6.5 percent are already slim following a slump in the third quarter of the year.
Gross domestic product (GDP) rose by just 5.3 percent in July to September—the slowest quarterly expansion since 2011. Last year, the Philippines was Southeast Asia’s best-performing economy, growing by 7.2 percent.
Despite the muted outlook, Cahyadi said there were reasons for cheer in 2015. Higher government spending ahead of the 2016 elections can provide a substantial boost, DBS said.
“Strong fiscal revenue growth, likely to remain above 10 percent, remains an underlying support for the government’s infrastructure plan,” he said.
“Meanwhile, private consumption and investment growth are likely to remain supportive of GDP growth as well,” he said.