Credit Suisse retained its 2017 gross domestic product growth forecast for the Philippines at 6.4 percent, saying its pivot to China will help attract more foreign direct investments and boost tourism.
The Zurich-based multinational financial services holding company said the pivot to the world’s second-largest economy would also remove political frictions between the two nations, especially the tension brought about by a maritime dispute in the West Philippine Sea since 2012.
“We continue to have an above consensus forecast for the Philippines’ GDP [2017: 6.4 percent; versus consensus 6.1 percent]…. We also view the Philippines’ ‘pivot towards China’ as a net positive for 2017 GDP and balance of payments, as it will help bring in more FDI and tourism from China in 2017 with political drags remove,” it said.
Credit Suisse said the expansionary fiscal policy of the Duterte administration would also support growth next year, adding that the government spending could rise to 18.1 percent of GDP in 2017 from an estimated 17.5 percent of GDP this year.
“Private consumption is also fundamentally supported by a tighter labor market, steady employment growth, low domestic rice prices, together with government measures to support the lower-income,” it said.
Credit Suisse also downplayed any adverse effects of the policy of newly-elected US President Donald Trump on the Philippine economy next year and beyond, saying a sharp slowdown in investments from the world’s biggest economy would be unlikely.
“Our analysis across the region suggests that the US FDI is driven more by structural economic considerations rather than political noise, unlike in China. While President Trump had pledged to raise taxes on corporations which offshore jobs, leading to some client concerns on the BPO sector, we note that the president has to go through Congress to implement them, where he could face opposition from traditional Republicans,” Credit Suisse said.
It said the Philippines’ source of foreign direct investments also diversified from the US, with Japan now the largest FDI investor in 2016.
Finance Secretary Carlos Dominguez III said last week the country could withstand the adverse effects of protectionist policy of Trump because the Philippines was beginning not to rely too much on the western economies, particularly the United States.
Trump said during the campaign period that US immigration policies might be tightened and outsourcing activities could be reduced in a bid to bring back jobs to the US.
“Our economy does not rely on exports too much. That is why even during the crisis in 2008 we were not so much affected,” Dominguez said at the sidelines of a Senate 2017 budget hearing.