AMERICAN banking giant Citigroup and Dutch financial group ING Bank have upgraded their Philippine economic growth forecasts for this year and next year following the stronger-than-expected output in the fourth quarter of 2015.
Citigroup raised its gross domestic product (GDP) growth forecast for the country this year to 5.4 percent from 5.1 percent. For next year, Citi’s GDP growth forecast was also upgraded to 6 percent from 5.5 percent.
ING raised its 2016 growth forecast for the Philippines to 6.2 percent from 6 percent previously on expectations that domestic investments would further increase.
This was after GDP growth in the fourth quarter of 2015 came in at 6.3 percent, beating the consensus forecast of 5.9 percent.
Citi expected domestic demand to grow by 7.4 percent year-on-year in the first quarter but this was seen to ease to levels below 5 percent in the fourth quarter “but with consumption in the driver seat.” The lack of meaningful export gains is also seen to restrain prospects for the country.
In a research note dated Jan. 28, Citigroup economist Jun Trinidad said that investments as a share of GDP should ease to 23 percent, taking into account contribution from ongoing infrastructure projects under the public-private partnership framework as well as other energy, infrastructure and real estate projects.
But as uncertainties ease in 2017, Trinidad said this would likely enable the country’s GDP to resume its historical growth pace of 6 percent.
“Domestic demand is likely to continue to power 2016 growth considering that the momentum of 2015’s robust performance of government spending and infrastructure boost would continue in 2016 while election spending delivers additional lift to economic activity,” ING Bank Manila senior economist Joey Cuyegkeng said in a note to clients. The GDP grew 5.8 percent in 2015, the slowest in four years.
“We believe that the strong government spending and infrastructure provisions would more than offset the drag that El Niño would bring to agriculture. Government has released a good portion of the 2016 budget to departments early this month to enable government department and agencies to beat the March 25 start of the election ban, Cuyegkeng noted.
Meantime, an Ateneo de Manila University economist said Tuesday that for the next administration to sustain the robust growth enjoyed under President Aquino’s watch, one of the most pressing problems needed to be addressed in the near term was Metro Manila’s traffic mess.
In an Ateneo Eagle Watch forum hosted by the Ateneo Center for Economic Research and Development, economics professor Alvin P. Ang said they expected the economy to expand by 6.4 percent this year. The government’s 2016 growth target is at a higher range of 7-8 percent.
Despite the agriculture sector seen to take a hit from El Niño during the first two quarters, election spending for the national polls scheduled in May would partly bolster first-semester economic expansion, Ang said, adding that durable investments made in the fourth quarter of 2015 would also come full stream early this year.
By the third quarter, economic growth may temporarily slow given a change in leadership, Ang said.