Morgan Stanley sees PHL growth at low end of government target

ECONOMIC growth this year is expected to hit the lower end of the government’s target range, Morgan Stanley said in a report.

The research arm of the financial services firm projected the Philippine economy to expand 6.5% this year, or at the low end of the government’s 6.5-7.5% target band for 2017. If realized, the bank’s projection would represent a slowdown from the 6.8% gross domestic product (GDP) expansion in 2016.

For 2018, the economy is expected to grow 6.6%, helping drive Asia (excluding Japan) to a 6% expansion for both 2017 and 2018.

DBS Bank two days ago said GDP will likely grow 6.4% in 2017 and 6.7% next year.

Meanwhile, the Philippines is “likely to receive the least upside from stronger exports” when compared with India and Indonesia as Asian exports are expected to rebound in 2017-2018.

The report came out before the Philippine Statistics Authority released on March 10 merchandise exports growing 22.5% year on year to $5.130 billion at the start of 2017, the first double-digit rise since November 2014.

Merchandise trade in 2016 grew 5.8% as 2016 total trade hit $137.4 billion, with a 14.2% rise in imports and a 4.4% decline in exports.

“The (Philippine) economy has not been affected by high debt and disinflation, and its growth cycle has been strong relatively to other countries in the region,” Morgan Stanley said.

“As such, this recovery in exports should help the whole region, but we view countries that have suffered from the debt-disinflation challenge as bigger beneficiaries: In particular, the group of Asia-6 (China, Hong Kong, South Korea, Singapore, Taiwan and Thailand) — which has been hampered by high debt and lowflation — stands to benefit,” it said.

Philippine inflation hit a 3.3% two-year high in February, taking the year-to-date inflation to 3%. The Bangko Sentral ng Pilipinas (BSP) recently revised its inflation forecasts to 3.5% for 2017 and 3.1% for 2018, still well within the government’s target range of 2-4%.

According to Morgan Stanley, both developed and emerging markets (EM) in Asia will further accelerate in 2017 and 2018 “for the first since 2010” as long as the United States does not implement aggressive protectionist measures.

Since Asia, excluding Japan, accounts for 60% of the US trade deficit, the risk of protectionist policies being taken by the US could weigh on the region’s exports.

“We believe that even if the US takes protectionist measures against a large country like China alone, high- level supply chain linkages within the region imply that the impact would reverberate across the region,” said Morgan Stanley.—