Philippines growth forecasts hiked

Credit Suisse, JP Morgan Chase Bank and Nomura Securities have raised their gross domestic product (GDP) growth forecast for the Philippines after a stronger-than-expected expansion in the second quarter of the year. (

Credit Suisse economist Michael Wan said it adjusted its GDP growth projection to 6.5 percent instead of 6.2 percent on the back of the stronger expansion in the first half of the year. The country’s GDP grew at a faster rate of seven percent in the second quarter from the revised 6.8 percent in the first quarter due to election-related spending. This brought the GDP expansion in the first half of the year to 6.9 percent from 5.5 percent in the same period last year. For the second half, Wan said GDP growth is seen slowing down to reflect the fading out of election boost.

“We maintain our overall positive view on the economy, driven by strength in private consumption, boosted by the increase in government salaries, a tighter labour market, and lagged impact of lower oil and rice prices,” he added. Credit Suisse retained its six percent GDP forecast for next year as it is still assessing the potential timing and impact of fiscal policy changes. “Expansionary fiscal policy will likely provide another fillip to the economy as we move into 2017,” he said.

He said the Duterte administration is spending more on social services, including education, healthcare and social protection for the poor, which supports lower and middle-income households. Cuts to personal income taxes would add more disposable incomes to the middle class, though net impact is still unclear, given potential hikes to oil and sugar excise duties, he added. Likewise, public infrastructure is seen improving in 2017 if the government manages to improve disbursement rates.

Nur Raisah Rasid, analyst at JP Morgan, said the bank has raised its GDP growth forecast to 6.4 percent as the economic output expanded seven percent instead of its 5.9 percent projection. The previous GDP growth projection of JP Morgan was at 5.3 percent. “Our growth narrative of the Philippine economy remains broadly unchanged; that is, domestic demand will likely remain robust due to investment growth which could further lower external balances,” she said.

The bank sees the country’s current account to narrow to 0.8 percent of GDP this year from 2.8 percent of GDP last year as investment remains on an upward trend. Nomura Securities, on the other hand, raised its GDP growth forecast anew to 6.7 percent instead of 6.3 percent this year and to 6.3 percent instead of six percent next year. Euben Paracuelles, economist at Nomura, said the pro-growth policies of the Duterte administration and the continuing reforms would encourage more private sector spending. “This revision is supported by the solid H1 growth average of 6.9 percent, an impact from the Brexit vote that was more contained than our initial expectations and, more importantly, by the Duterte administration’s commitment to policy continuity in implementing economic reforms and building infrastructure,” he said. 

For the second half, Paracuelles said the growth is expected to ease to 6.5 percent as the election-related boost to growth in the first half fades. He pointed out the planned increase in the budget deficit ceiling to three percent of GDP instead of two percent of GDP with increased infrastructure spending would boost growth in 2017.