ING forecasts 6-6.5% Phl growth for 2014

MANILA, Philippines - Anglo-Dutch banking giant ING said it expects the Philippine economy to still expand by 6-6.5 percent this year, although slower than last year’s impressive 7.2 percent rate.

ING Bank Manila senior economist Joey Cuyegkeng said in a report that the economy could even grow a maximum 6.5 percent as the government drastically increases infrastructure spending.

“We expect government spending to recover as it did in June from a very weak April-May spending performance. September government spending is likely to mimic June spending surge if indeed government’s account payable has dropped,” he added.

ING Bank also maintains that the country’s gross domestic product (GDP) will expand by 6.5 percent next year. State planners are looking at an optimistic seven to eight percent growth rate, although power concerns and the El Nino weather phenomenom are expected to spill over to the first half of 2015.

PPP infrastructure projects also get into some form of real activity in 2015 while the necessity to improve government spending on infrastructure by mid-2015 would likely propel a stronger second half of 2015 growth.

In effect, the economy can withstand further pre-emptive Bangko Sentral ng Pilipinas (BSP) action if necessary.

The ING Bank economist said that inflation would settle to moderate at best or remain steady at worst.

“Monetary policy views wait for BSP guidance. BSP forecasts September inflation at 4.1 percent to 4.9 percent,” Cuyegkeng added.

The ING outlook is more moderate than the BSP’s August inflation forecast of 4.7 percent to 5.5 percent.

The Asian Development Bank (ADB) cut last week Philippine growth forecasts to 6.2 percent (from 6.4 percent) for 2014 and to 6.4 percent (from 6.7 percent) in 2015.

The World Bank also downgraded its forecast to 6.4 percent (from 6.6 percent in 2014 and to 6.7 percent (from 6.9 percent) in 2015.

Risk of continued government underspending also for infrastructure is one reason for the downgrade by the two institutions.