UBS hikes Phl growth forecast

MANILA, Philippines - The Union Bank of Switzerland (UBS) has revised its economic growth forecast for the year to 6.3 percent from its previous projection of 4.5 percent.

The 6.3 percent is above the government’s official target of five percent to six percent for 2012.

In revising this year’s growth projection, UBS said it took into account the stronger-than-expected growth in the third quarter of the year of 7.1 percent.

In a report, UBS said that if this year’s growth surpasses six percent, it would be only the sixth time since 1980 that growth exceeded six percent.

“Philippine real GDP growth has only surpassed six percent five times since 1980, in 1988, 1989, 2004, 2007 and 2010,” UBS said in a report titled, “Philippines by the Numbers.”

However, despite the strong third quarter growth, UBS said that its growth forecasts for 2013 and 2014 are expected to remain unchanged.

“We forecast real GDP growth of 4.5 percent in 2013 and 4.9 percent in 2014. Investment growth, we expect to outperform. Our 2013 and 2014 real GDP projections are essentially unchanged despite the stronger than expected growth in the third quarter of 2012,” UBS said.

The Switzerland-based bank said that although trade is expected to improve next year, the improvement may not be enough to spur strong growth.

“We expect an improvement in trade growth during 2013, lead indicators of trade activity and domestic activity suggest the tail end of the year may be a little below par,” UBS said.

Furthermore, UBS said the government must come up with plans to boost growth and support investments.

“Also in tune with the region, a combination of government plans and low interest rates should come together to support investment growth,” UBS said.

At the same time, the investment bank noted the Aquino administration’s efforts to improve governance and push for higher sin taxes.

“We remain positive on the Philippine economy. A pick up in investment activity would be a plus for future growth. Also potentially positive are the government’s reform efforts. We note the anti-corruption drive, a bill to raise sin taxes and the movement towards a peace deal in the southern Philippines,” it said.

However, UBS cautioned the government against delays in spending, saying that this could dampen growth.

“The risk we identify is that spending programs may be delayed and fiscal policy remains relatively tight,” it said.