ECONOMISTS have upgraded their economic growth forecast for the Philippines this year after the 7-percent second quarter growth beat consensus.
Citibank economist Jun Trinidad jacked up his full-year gross domestic product (GDP) growth forecast for the country to 6.7 percent from 6.3 percent, noting some upside from domestic demand.
“We remain a believer in the strong domestic demand story that will extend from first half 2016 up to next year. But due to government in ‘transition’, slowdown in PPP (public private partnership) project activities and capex (capital expenditure) peaking in the first half 2016, we expect domestic demand to settle for slower growth,” Trinidad said.
The country’s GDP growth rate of 7 percent year-on-year in the second quarter beat market consensus of 6.6 percent.
This also brought the six-month growth to 6.9 percent, making it an outperformer in the Asian region.
Emilio Neri Jr., chief economist of the Bank of the Philippine Islands, said a brief and shallow GDP growth slowdown may happen this second semester due to the leadership transition.
But Neri said BPI could upgrade its full-year GDP growth forecast to 6.5 percent, at the most, from 6.3 percent following the stronger second quarter output.
Neri said overall growth in the second quarter was propelled by election spending and infrastructure projects that were in the pipeline for April and early May.
However, government spending is seen to ease for the remainder of the year.
JP Morgan, meanwhile, said its growth narrative of the Philippine economy remained broadly unchanged.
“Domestic demand will likely remain robust due to investment growth which could further lower external balances,” JP Morgan economist Nur Raisah Rasid said, noting that the bank’s growth outlook had thus been raised to 6.4 percent for the full year.
HSBC economist Joseph Incalcaterra said that with 6.9 percent growth in the first half, the Philippines was still on track to meet the government’s official target of 6-7 percent for the full year.
For its part, HSBC is expecting a growth of at least 6.3 percent.
“The second quarter GDP is yet another reminder that the Philippine economy is dancing to a very different tune compared to the rest of the region,” Incalcaterra said.
The continuation of the high-growth, low-inflation environment means that there is little need for the Bangko Sentral ng Pilipinas to tweak its monetary policy stance anytime soon, apart from operational changes such as increasing the volume of the term deposit facility, the HSBC economist said.
Investment house First Metro Investment Corp. (FMIC) and the University of Asia and the Pacific (UA&P) also see robust growth, believing that the domestic economy can expand at a faster pace of 7.3 percent this second semester even without the presidential election spending that perked up first semester output.
In the August issue of FMIC-UA&P’s joint research publication “The Market Call,” these institutions expressed confidence in the country’s economic momentum, citing the confluence of an action-oriented President, low inflation and interest rates as well as robust consumer and investment spending.
For the second semester, the institutions expect growth to be sustained at 6.6 percent to as high as 7.3 percent.
Then in a Aug. 19 note to clients, Credit Suisse raised its growth projection for the Philippines to 6.5 percent from 6.2 percent previously “on the back of the stronger first-half GDP,” which stood at 6.9 percent.
While Credit Suisse sees “some slowdown in the second half, reflecting fading out of election boost,” it said the full-year GDP expansion would be “driven by resilience in private consumption, boosted by an increase in government salaries, a tighter labor market, and lagged impact of low oil and rice prices.”
Nomura also on Aug. 18 hiked to 6.7 percent its Philippine growth forecast for 2016 from 6.3 percent previously.
“This revision is supported by the solid first-half growth average of 6.9 percent, an impact from the Brexit vote that was more contained than our initial expectations and, more importantly, by the Duterte administration’s commitment to policy continuity in implementing economic reforms and building infrastructure,” it said.
“In our view, these factors should keep GDP growth robust in the second half, averaging 6.5 percent even as the election-related boost to growth in the first half fades,” Nomura added.
For his part, Finance Secretary Carlos G. Dominguez III over the weekend expressed confidence that the Duterte administration’s 6-7 percent gross domestic product (GDP) growth target for 2016 will be achieved.
“We need only to grow 5.1 percent for the next two quarters to achieve between 6 and 7 percent for the whole of 2016,” the Finance chief noted.