ING sees stronger 2016 growth for PH

Dutch financial giant ING has raised its economic growth forecast for the Philippines this year, taking into account improved government spending, buoyant consumer spending and affordable financing for the private sector.

ING also sees the Bangko Sentral ng Pilipinas (BSP) keeping its key interest rates steady during the next week’s policy meeting, the bank’s senior economist Joey Cuyegkeng said in a research note issued yesterday.

For this year, ING upgraded its gross domestic product (GDP) growth forecast to 6.5 percent from the 6.2 percent forecast as of February.

“We believe that second quarter GDP growth could accelerate further while second half growth moderates to an average of 6 percent,” Cuyegkeng said.

In the first quarter, Philippine GDP grew by 6.9 percent year-on-year, the fastest seen in Asia, driven by election spending.

For 2017, ING sees the country’s GDP rising by 6.2 percent.

“We anticipate that higher consumers’ incomes and purchasing power and higher government spending would keep growth at above 6 percent in 2017. Improvement in agriculture output in 2017 would present some upside possibilities,” he said.

ING also sees remittances from overseas Filipinos remaining resilient or even improving as oil prices have started to stabilize at $40 to $50 per barrel.  Cuyegkeng noted that remittances had exhibited resilience even after crude oil prices plummeted to multi-year lows early this year.

Oil prices have gained 70 percent since the lows early this year and could consolidate as global demand and supply dynamics improve, the economist said. In addition, deployment of highly skilled workers and professionals had contributed to such resilience.

ING expects remittances to grow by an average of 3.5-4 percent this year. Including foreign exchange revenues from the country’s outsourcing industry, ING sees structural inflows growing by 9 percent this year from nearly 11 percent last year.

On monetary policy, the ING economist said the May inflation rate of 1.6 percent was in line with forecasts.

“The higher May inflation is still in line with our 2016 average inflation forecast of 1.7 percent which implies steadily higher inflation to end of this year. Inflation expectation remains steady at 3 percent for 2017 while inflation for the rest of the year is expected to trend higher to end the year above 2 percent,” Cuyegkeng said.

He said high monetary liquidity and strong cash position of government would curb uptick in yields resulting from higher deficit spending.

ING estimates that the increase in deficit spending to 3 percent of GDP would entail around P150 billion more in government financing needs for 2017.

“Domestic liquidity remains high while the cash position of government is expected to remain strong in the near term. The financing options of government also allows for higher ROP (Republic of the Philippines offshore bonds) issuances while the incoming government also considers other financing options including the issuance of Sukuk (Islamic) bonds,” he said.