Citi hikes Philippine growth forecasts for 2015, 2016

MANILA, Philippines - American banking giant Citigroup has raised the country’s economic growth forecasts for this year and next year on the back of robust domestic demand led by strong household consumption.

Citi senior economist Jun Trinidad said the gross domestic product (GDP) growth forecast for the Philippines has been upgraded to 5.8 percent instead of 5.6 percent this year and to 5.1 percent instead of 4.8 percent next year. 

“Domestic demand theme will continue to prevail in a less than stellar 2016 with household consumption leading the way. Election spending peaks in the first quarter of 2016 but windfall remittance gains with Philippine peso veering to 48.50 would prime demand,” Trinidad said.

Trinidad said out the risks of slower momentum would come from government in transition that would cause ongoing public investments to slow down sharply post-elections as well as offshore developments led by tightening global rates, uncertain China and emerging markets recovery.

He said unfamiliarity with new government’s policy agenda could curtail private investments.

For next year, Trinidad warned domestic demand could ease to 5.4 percent from about seven percent this year with ongoing public private partnership (PPP) project implementation as the key anti-cyclical growth catalyst in play.

The country’s GDP growth accelerated to six percent in the third quarter from the revised 5.8 percent in the second quarter and from 5.5 percent in the same quarter last year due to robust government and private consumption.

Trinidad said the growth in the third quarter was better than Citi’s forecast of 5.8 percent.

Trinidad said domestic demand excluding investments soared eight percent year-on-year to lead GDP on the back of upbeat household consumption with 6.3 percent growth, government consumption with 17.4 percent, and uplifted real investments with 9.3 percent.