JP Morgan sees RP economy growing by 6.8% this year

MANILA, Philippines - US-based investment bank JP Morgan expects the Philippine economy to grow by 6.8 percent this year, revised from its earlier economic growth forecast of 4.5 percent following the country’s higher-than-expected first quarter growth of 7.3 percent.

“Even with a bit of payback forecast this quarter, we have had to revise up our 2010 gross domestic product (GDP) forecast to 6.8 percent from 4.5 percent previously. It is important to note though that much of this is statistical in nature and we do expect sequential growth to moderate from its blistering pace recently,” it said.

With government expecting the economy to continue growing this year, JP Morgan said the Bangko Sentral ng Pilipinas (BSP) may finally hike interest rates by 25 basis points at next week’s meeting to siphon off excess liquidity in the system.

The BSP’s borrowing rate currently stands at four percent while its lending rate is at six percent.

However, JP Morgan said that monetary policy would really depend on heightened risks emanating from global financial markets and sovereign stress.

The investment bank noted that growth was driven primarily by external demand in the first quarter, with exports, government spending and consumption all registering significant improvements.

Similarly, Capital Economics, a global investment and securities research firm said that growth is likely to rise to 5.5 percent this year, higher than its previous forecast of 4.5 percent.

It expects growth to be sustained on the back of robust dollar remittances from overseas Filipinos.

“The first quarter GDP data will probably be as good as it gets for this year and in 2011,” it noted.

The National Statistical Coordination Board (NSCB) reported that the Philippine economy expanded by 7.3 percent in the first quarter of the year, the highest quarterly growth recorded since the 8.3 percent-growth registered in the second quarter of 2007.

The 7.3 percent gross domestic product growth is a marked improvement from the 0.5 percent recorded in the first quarter of 2009 and is above the National Economic and Development Authority’s growth forecast for the period of 2.9 percent to 3.9 percent.

With first quarter growth surpassing expectations, Acting Socioeconomic Planning Secretary Augusto Santos has said that the interagency Development Budget Coordination Committee (DBCC) would soon meet to revise upward the 2.6 percent to 3.6 the economic growth target for the year.