DBS Bank of Singapore kept its growth forecast for the Philippines this year at 6.3 percent on possible moderation in private sector investment that may offset the increase in spending of the Duterte administration.
“At this juncture, we maintain our 2016 GDP growth forecast at 6.3 percent. There are some upside risks to our 2017 GDP growth forecast of 6.3 percent, given the upward revision in fiscal deficit,” the bank said in a report Friday.
“Nevertheless, it is important to see how the private sector will respond to the new administration’s policies. Let’s not forget that there has been a tremendous frontloading of investments since 4Q15, ahead of the elections in May,” it said.
It said a moderation in private sector investment could offset the growth-boosting measures set by the new government.
President Rodrigo Duterte earlier said his administration would increase fiscal spending, especially for infrastructure projects, to sustain the growth of the economy.
But on Tuesday, the Duterte administration lowered the GDP forecast this year to 6 percent to 7 percent from the previous administration’s target of 6.8 percent to 7.8 percent. For 2017, the GDP growth is seen settling between 6.5 and 7.5 percent, slightly lower than the previous target of 6.6 percent to 7.6 percent.
Budget Secretary Benjamin Diokno said factors that might affect economic expansion this year could be the tapering of the effects of election spending, slow agricultural output due to El Niño, weak infrastructure activities because of seasonality and reduced external trade.
“Growth is still seen to accelerate going forward, however, with the 7-8 percent target set for 2018-2022. Core to the assumption, fiscal deficit will be raised to 3 percent of GDP as the government’s infrastructure spending is set to rise to 5 percent of GDP starting in 2017,” DBS said.
Earlier, global credit watchdog Standard & Poor’s Rating Services slightly raised the growth forecast for the Philippines this year to 6.1 percent from the earlier estimate of 6 percent, despite the turmoil brought about by the recent exit of United Kingdom from the European Union and slowdown in Chinese economy.
In a report titled “Asia-Pacific’s Overall Economic Picture Brightens A Bit Outside Of China” released on Wednesday, S&P said the Philippines would continue to outperform its peers in the Asean region. The forecast for the Philippines is higher than that of Indonesia’s 5.1 percent; Malaysia, 4.5 percent; Singapore, 1.8 percent; and Thailand’s 3.2 percent.
For 2017, it said the Philippine economy could grow by 6.3 percent, stronger than Indonesia’s 5.3 percent, Malaysia’s 4.7 percent, Singapore’s 1.9 percent, and Thailand’s 3.2 percent.