MANILA, Philippines - More investment banks have lowered their economic growth forecasts for the Philippines despite the slight uptick in the second quarter of the year.
DBS Bank of Singapore slashed its gross domestic product (GDP) growth forecast for the Philippines to 5.7 percent from the original target of six percent this year.
“The full-year GDP growth may only reach 5.7 percent versus our earlier projection of six percent,” DBS said in a research note.
However, the investment bank is not ruling out a six percent GDP growth this year depending on the eventual pace of fiscal spending for the rest of the year.
Lack of government spending and weak global demand pulled down the GDP growth to 5.3 percent in the first half of the year from 6.4 percent in the same period last year.
Economic growth, however, picked up slightly to 5.6 percent in the second quarter of the year from the revised five percent in the first quarter amid the improved public spending.
“Looking ahead, downside risks to GDP growth remain prevalent, mainly on the external front,” the bank said.
Global financial markets have been rattled by external shocks including the stock market rout last Aug. 24, the devaluation of the Chinese yuan last Aug. 10, the impending interest rate increase by the US Federal Reserve, among others.
On the other hand, ING Bank Manila senior economist Joey Cuyegkeng said the country’s GDP would likely average 6.3 percent in the second half of the year from 5.3 percent in the first half.
“We retain our forecast growth of 5.9 percent in 2015 with a 6.3 percent second half GDP growth,” he added.
Cuyegkeng said domestic demand would continue to power overall growth with expected acceleration in government spending and construction activity.
Likewise, he explained the growth in household spending is likely to remain strong at around six percent in the second half of the year.
Government economic managers have set a GDP growth target of between seven and eight percent this year but Socioeconomic planning Secretary Arsenio Balisacan said growth could settle at six to 6.5 percent this year.
Both DBS and ING Bank expect the Bangko Sentral ng Pilipinas (BSP) to keep its monetary policy stance unchanged for the rest of the year.
“Monetary policy settings are likely to remain steady in the very near term while BSP remains focused on possible risks to inflation and financial sector stability,” Cuyegkeng said.
The BSP has kept interest rates on hold since September last year amid steady GDP growth and easing inflation.
The BSP has penned an inflation target of between two and four percent but it averaged 1.9 percent in the first seven months of the year after easing to a record low of 0.8 percent in July.