Foreign banks raise Philippine economic growth forecasts

MANILA, Philippines – Foreign investment banks HSBC, Nomura, and Barclays have raised their economic growth forecasts for the Philippines after a strong performance in the third quarter. 

Joseph Incalcaterra, economist at British banking giant HSBC, said the bank raised its gross domestic product (GDP) growth target for the Philippines to 6.8 percent from 6.5 percent this year.

“Momentum to continue to 2017 on the back of infrastructure spending and resilient remittances; risks are manageable,” he said.

Incalcaterra said the data show the Philippine growth story remained intact in the third quarter as the GDP growth accelerated to 7.1 percent from seven percent in the second quarter.

This brought the GDP expansion to seven percent in the first nine months, settling at the higher end of the six to seven percent target penciled by economic managers under the Duterte administration.

“Due to the high base, we adjust our full-year growth profile to 6.8 percent (from 6.5 percent previously) and expect 6.5 percent growth in both 2017 and 2018. In this piece, we look at some of the risks to the growth outlook and the implications,” he added.

He explained the country’s business process outsourcing (BPO) sector would be affected by the more protectionist stance toward trade and outward investment of US president elect Donald Trump.

Nomura economist Euben Paracuelles raised the country’s GDP growth forecast to 6.9 percent instead of 6.7 percent as the third quarter results beat expectations due to still-strong investment spending.

“This implies still-strong growth of 6.5 percent year-on-year in forth quarter versus a first quarter to third quarter average of seven percent. We expect this momentum to continue into 2017 and 2018, and therefore maintain our forecasts of 6.3 percent and 6.5 percent, respectively,” Paracuelles said.

Despite the noise from President Duterte’s controversial rhetoric, Paracuelles expects the government to make more progress on infrastructure spending than its predecessor and boost reforms, particularly by cutting red tape and implementing comprehensive fiscal changes.

“The continued strength in domestic demand will provide significant buffers against downside risks from external factors, including the impact of President-elect Trump’s proposed policies,” he said.

Barclays economists David Fernandez and Rahul Bajoria said the bank adjusted upwards the GDP growth forecast for the Philippines to 6.8 percent instead of 6.6 percent for 2016 and to 6.8 percent instead of 6.3 percent for 2017 due to the higher-than-expected print for the third quarter of the year.

Fernandez and Bajoria said the accommodative monetary stance of the Bangko Sentral ng Pilipnas (BSP) as well as the expansionary fiscal stance of the Duterte administration would continue to support growth.