MANILA, Philippines – Global banking giants Citi and HSBC upgraded their growth forecasts for the Philippines this year following “better-than-expected” growth in the 2nd quarter.
Citi raised its 2013 gross domestic product forecast for the Philippines to 7.3% from 7%, while HSBC hiked its projection to 7.1% from 6.4%.
Both said exports will improve in the 4th quarter, boosting growth, and added household and government consumption will remain strong.
“We expect net exports to improve, especially in Q4 when growth in the US, Japan, China and eurozone should accelerate,” said HSBC in a research note.
The Philippines grew 7.5% in the 2nd quarter – the same pace as China – making the two countries the fastest growing in Asia. This brought growth in the 1st half to 7.6%, above the government’s 2013 target of 6% to 7%.
Growth was largely driven by consumer and government spending, but investments also provided support.
Citi and HSBC said remittance inflows, a weaker peso and benign inflation will continue to drive household consumption.
Citi however warned that delays in the implementation of infrastructure projects under the Public-Private Partnership program “lead us to be more sober in our investment growth forecasts.”
It said financial volatility due to the anticipated winding down of the US Federal Reserve’s stimulus program can also impact investments.
HSBC nevertheless said that sound fiscal and monetary policy will “help the Philippines weather the recent volatility triggered by the withdrawal of US liquidity.”
New growth trajectory?
The 2nd quarter marked the 4th consecutive quarter that the Philippines grew above 7%.
Socioeconomic Planning secretary Arsenio Balisacan said the country is moving away from being largely consumer-driven to investment-led. He said it is now on a higher growth trajectory.
But Citi said the Philippines’ prospects in the 2nd half and next year “retain a slower growth trajectory” of “less than 7% growth.”
“Lacking strong export recovery also downplays a higher trajectory.”
It said a more important concern is the “rising potential of relying on consumer-driven growth” for GDP growth of 7% or more. It warned this growth will not necessarily lead to higher job creation.
Balisacan said sustained investments and industry gains, particularly in manufacturing, are the ones “with the ability to provide high-quality jobs for Filipinos.” – Rappler.com