S&P lowers growth forecasts for PH, Asia

Expectations for Philippine economic growth have gone down a few pegs as the entire Asia-Pacific region struggles with headwinds caused by volatile financial markets and weak global trade.

International ratings firm Standard & Poor’s (S&P) this week slashed growth forecasts for Asian countries like the Philippines amid a wobbly Chinese economy and muted demand for the region’s exports.

This followed another recent cut in projections by S&P’s peer, credit-rating firm Moody’s Investor Service, indicating the dimming of prospects for the region that outperformed the rest of the world in the past five years.

“Although market fears that the sky is falling are almost certainly overblown, in our view, they have been enough to ‘move the needle,’” said Paul Gruenwald, S&P’s chief economist for Asia.

The rating firm sees the Philippine economy growing by 5.6 percent in 2015 and 2016. S&P originally saw gross domestic product (GDP) rising by 6 percent for both years.

S&P’s new forecasts are in line with cuts made for bigger Asian economies, and the Philippines’ own peer group. The projection for China remains unchanged, but the firm lowered those for 2016 to 6.3 percent and 2017 to 6.1 percent (from 6.6 and 6.3, respectively).

The GDP forecast for Japan this year was brought down to 0.6 from 0.9 percent, and for Australia to 2.5 percent for 2015 and 2016 from 2.6 and 2.9 percent, respectively.

The projection for combined GDP growth for Southeast Asia’s four major emerging markets—Indonesia, Malaysia, Philippines and Thailand—was slashed to 4.6 percent (from 4.9 percent) for 2015 and 4.8 percent (from 5.1 percent) for 2016.

Weak global trade would be the main drag for the Asia-Pacific region, S&P said, even as the US economy—a major market for exports—recovers. China, the focal point for the region’s supply chain, has seen its own manufacturing sector weaken in recent months. This is expected to drag down its trading partners.