Nomura Securities Ltd. sees second half GDP growth rising to 6.8%

MANILA, Philippines — Nomura Securities Ltd. expects a faster 6.8 percent gross domestic product (GDP) growth for the Philippines in the second half from 6.3 percent in the first half.

Euben Paracuelles, economist at Nomura, said the GDP expansion would average 6.5 percent this year from 6.7 percent last year.

“We reiterate our 2018 gross domestic product growth forecast of 6.5 percent which suggests growth will rise to 6.8 percent in the second half from 6.3 percent in the first half,” he said.

Economic managers through the Development Budget Coordination Committee (DBCC) have set a GDP growth target of between seven and eight percent this year.

Amid the steady growth, multilateral lender International Monetary Fund (IMF) as well as debt watcher Fitch Ratings and economists of investment banks have flag overheating risks in the Philippines.

BSP Governor Nestor Espenilla Jr. had said the Philippine economy remains strong to accommodate tighter monetary conditions brought about by the series of rate hikes.

The BSP has so far raised benchmark rates by 100 basis points to rein in inflationary expectations brought about by higher oil and food prices, transport fare and wage hikes, weak peso, and the impact of the implementation of the Tax Reform for Acceleration and Inclusion (TRAIN) Law.

Paracuelles said Nomura expects further tightening in the country’s monetary conditions amid the elevated inflation.

“This also supports our view that the BSP will hike by another 50 basis points this year in response to rising inflation and inflation expectations, taking the policy rate to 4.50 percent,” he said.

Inflation averaged 4.5 percent in the first seven months after kicking up to a nine-year high of 5.7 percent in July from 5.2 percent in June.

The BSP sees inflation hitting 5.9 percent in August as it is expected to peak in the third quarter of the year before easing in the fourth quarter.