The Philippines’ second quarter annual growth rate of 6.5 percent, which slightly beat market expectations, supported analysts’ sanguine view on the country’s growth prospects for the remainder of the year.
“The mildly stronger second quarter GDP (gross domestic product) print should ease concerns of a sharp growth slowdown that would have undermined confidence,” investment house BofA Merrill Lynch said in a research note.
The 6.5-percent GDP growth rate turned out slightly better than the consensus growth forecast of 6.4 percent. It also improved slightly from the 6.4-percent growth in the first quarter.
BofA Merrill Lynch said growth drivers have shifted from private investment and services to agriculture, manufacturing and government spending.
It said it would be keeping its growth forecast of 6.3 percent for the full year, expecting government spending to take a stronger lead in driving growth.
In a separate research note, Japanese investment house Nomura said it was maintaining its outlook of 6.7 percent for 2017, implying a faster growth in the second semester that should be supported by rising public investments.
“[This] implies a pickup to 6.9 percent in second half from 6.4 percent in first half, driven by more fiscal support to growth, particularly from an increase in capital spending,” Nomura said.
Given the growth trajectory, Nomura added it remained comfortable with its forecast for Bangko Sentral ng Pilipinas (BSP) to keep its interest rates steady this year before hiking by a cumulative 50 basis points in the second half of 2018.
“We continue to expect government spending to accelerate given the administration’s strong push to implement public sector infrastructure projects and avoid past problems of underspending. More progress on infrastructure projects should continue to crowd in private investment,” Nomura said.
“Buoyant sentiment, resilient remittances, low inflation and falling unemployment should also support a further pickup in household consumption, as already reflected in motor vehicle sales, which rose 23.3 percent year-on-year in July from 12 percent in second quarter,” it added.
In the interim, Nomura continues to see a likelihood of cuts in the reserve requirement ratio this year, believing that new BSP Governor Nestor Espenilla has a stronger bias than his predecessor in bringing down the current 20 percent to levels similar to regional peers.