JP Morgan raises growth forecast for PH

Low fuel prices, cheap credit, and favorable investor sentiment will help the economy build on the gains seen late last year to grow at a faster rate in 2015, American financial giant JP Morgan said.

In a note to clients, JP Morgan said it had revised its growth projection for the Philippines, due largely to the faster-than-expected expansion seen in October to December of 2014.

“This positive growth dynamic reflects several factors,” JP Morgan said Tuesday.

JP Morgan cited a palpable shift in business sentiment, as reflected in surveys and strong private investment flows.

Historically low domestic interest rates and accommodative credit conditions, a lift in exports and easing inflation on the back of lower energy prices should also lead to higher growth, it said.

For 2015, JP Morgan expects the Philippine economy to grow by 6.4 percent, faster than its previous projection of 5.4 percent.

Last year, gross domestic product (GDP) expanded by 6.1 percent, lifted by the 6.9-percent growth recorded in the last quarter of the year. In 2013, the Philippine economy grew by 7.2 percent.

Government data showed domestic demand and external demand added to growth, with domestic demand contributing 3.2 percentage points over the level a year ago, JP Morgan said.

In terms of domestic demand, private consumption rose by 5 percent quarter-on-quarter, while investments went up by 6.1 percent.

Government spending rose by more than a third or 34.3 percent quarter-on-quarter, which could reflect stronger disbursement in the last quarter after relatively weak disbursements during much of 2014.

Firmer domestic demand should also be complemented by the PPP (Public Private Partnership) infrastructure spending, JP Morgan said.

“In particular, the rise in investment is positive. It suggests that underlying conditions remain positive and this is also echoed in the higher frequency data on motor vehicle sales and bank credit, with the latter continuing to deliver a positive impulse to the economy,” it added.

The bank warned that lingering effects of last year’s port congestion may still play a role this year. Despite the positive tone in the data, the port bottlenecks that plagued imports have not fully normalized, and anecdotal evidence suggests that the backlogs remain.

“Whether this will constrain growth this year remains to be seen,” it said.