Nomura hikes Phl growth forecast

MANILA, Philippines – Nomura Securities Co. of Japan raised the economic growth outlook of the Philippines this year and next year on the back of higher government spending and higher investment arising from the take off of the public private partnership (PPP) program of the Aquino administration.

In a report, Nomura economist Euben Paracuelles said the gross domestic product (GDP) growth forecast for the Philippines has been raised to 4.6 percent instead of 4.2 percent this year and to six percent instead of 5.6 percent next year.

“Given the positive developments in the expenditure program and better prospects for execution, we upgrade our 2012 GDP growth forecast to 4.6 percent from 4.3 percent... We also raise our 2013 growth forecast to 6 percent from 5.6 percent,” he stressed.

The Philippines, according to Paracuelles, is one of only two countries in Asia aside from Thailand that is expected to experience a faster growth this year than last year amid the global external shocks.

He pointed out that the previous 2012 GDP growth forecast of Nomura incorporated a reversal of the large fiscal drag in 2011.

According to him, the Philippine government has scope to implement additional stimulus measures.

Nomura sees the country’s budget deficit hitting 2.8 percent of GDP this year before narrowing to 2.5 percent next year.

“However, given our analysis of the 2012 budget and the improved execution, we think there could be additional support to growth from fiscal spending and the associated boost to overall investment - hence the GDP upgrade,” Paracuelles added.

Nomura said it expects to witness the usual election-related boost from mid-term Congressional elections in May 2013.

Aside from election-related spending, Paracuelles said the momentum in public and private investment spending would be sustained in 2013 underpinned by improvements in governance and the overall quality of fiscal spending.

“We think consensus underestimates the extent to which the much-improved fiscal position is finally creating enough space to lift public investment spending in a sustained fashion, while simultaneously creating a virtuous cycle by lowering borrowing costs, crowding in private domestic spending and attracting more foreign direct investment, which in turn lifts GDP growth and further improves the public debt dynamics,” it added.