ING Bank of the Netherlands on Tuesday raised its 2016 economic growth forecast for the Philippines to 6.2 percent from an earlier estimate of 6 percent, as it expects more robust activities in the country in the coming months.
The Dutch bank made the upward adjustment, even as the Philippines’ gross domestic product growth decelerated to 5.8 percent in 2015 from 6.1 percent in 2014.
“The overall GDP growth in 2015 of 5.8 percent was slower than 2014’s 6.1-percent pace. We are not discouraged by this, since the trajectory of growth in the coming first half seems to be on an uptrend,” ING Bank Manila senior economist Joey Cuyegkeng said in a report.
“Milder impact of the weather-related disasters on agriculture together with stronger mining, construction, transport and communication, financial intermediation and real-estate performances was one of the reasons for the upside surprise,” Cuyegkeng said.
He said government construction activity continued to post robust growth while investments in durable equipment together with overall strong government and household spending boosted overall economic activity. He cited the second consecutive quarter of strong durable equipment investments.
Domestic demand, Cuyegken said, was likely to continue to power 2016 growth, as the momentum of 2015’s robust performance of government spending and infrastructure boost would continue in 2016 while election spending would deliver additional lift to economic activity.
“Based on the strength of domestic demand growth in 2016, we revise higher our 2016 economic growth to 6.2 percent from 6 percent,” Cuyegkeng said.
He said the upward revision in GDP growth this year also considered the expected slower growth in remittances from overseas Filipino workers, especially those based in the Middle East. Money sent home by OFWs in the Middle East accounted for 22 percent of total remittances in 2014 and 2015.
“News from these economies about the repercussions of 12-year low oil prices and challenging fiscal positions raise the likelihood of weakening remittances. Stronger US dollar has also affected remittances from other host economies such as EU, Japan and other Asian economies,” he said.
Cuyegkeng said structural inflows should amount to around $48 billion, even assuming a 5-percent year-on-year drop in OFW remittances this year as long as growth of outsourcing revenues would remain in the mid-teens.
“We cannot sweep aside the possibility of a contraction in OFW remittances. A 5-percent contraction in OFW remittances and a 16-percent growth in outsourcing revenues would still bring in $48 billion in structural inflows and still bring about higher household consumption,” Cuyegkeng said.
Global debt watcher Moody’s Investors Service earlier retained its 2016 growth forecast for the Philippines at 6 percent, saying the country was in a more robust position than many of its neighbors to ride out economic and financial market volatility.
Moody’s said in its credit outlook published Feb. 1 the 6.3-percent growth in the fourth quarter alone showed the Philippines’ resilience to external headwinds and the government’s “ability and willingness to shore up domestic demand amid a weak external environment.”