Economists downgrade Phl growth forecast to below 6%

MANILA, Philippines - Analysts, economists and fund managers have downgraded their Philippine economic growth forecasts this year to below six percent, well below the government’s 6.5-7.5 percent target range, due to a slowdown in third quarter performance.

Hongkong and Shanghai Banking Corp. (HSBC) and Maybank Kim Eng revised their full-year Philippine gross domestic product (GDP) growth to 5.9 percent, while ING Bank was a little more pessimistic with 5.8 percent.

Last Thursday, Economic Planning Secretary Arsenio M. Balisacan reported a disappointing 5.3 percent economic growth in the third quarter of 2014.

He said to even achieve the low end of government’s full-year target, fourth quarter output must expand by over eight percent.

Maybank Kim Eng chief economist Luz Lorenzo said government under-spending was the one of the major drags this year.

“With government spending expected to normalize only next year and more modest expectations for private consumption this year, we lower our GDP growth to improve only slightly to 5.9 percent this year. This is down from our previous forecast of 6.7 percent,” she said.

However, with the 2015 budget in place, the public sector will probably contribute more significantly next year at the same time that improved purchasing power leads to stronger private consumption.

Lorenzo added that net exports would contribute less to the domestic economy as imports recover more strongly and as the global economy remains weak.

“We lower 2015 GDP growth to seven percent from 7.5 percent,” the Maybank economist added.

HSBC economist Trinh Nguyen said customs trade number showed a jump in net exports due to the contraction of imports in the third quarter.

“Many believe that this will contribute positively to growth, offsetting the contraction of government spending,” Trinh said.

Likewise, continued dependence on a consumption-driven growth has limits. Remittances from overseas Filipinos, earnings from business process outsourcing (BPO), and an already lackluster Public-Private Partnership (PPP) program can only do so much.

But she said that private spending will continue to sustain growth into 2015 and accelerate in 2016, owing to the national elections.

“Thus, HSBC forecast from 2014 full year growth is 5.9 percent and 2015 expansion is 6.1 percent,” the HSBC economist said.

ING Bank Manila senior economist Joey Cuyegkeng said that they expect GDP to expand by 5.8 percent, despite a positive outlook on the fourth quarter this year.

“We expect full-year 2014 GDP growth to be slower and possibly below six percent. The nine-month average growth is barely 5.8 percent. GDP growth in Q4 is now forecasted at 5.9-six percent,” Cuyegkeng added.