2015 PHL growth forecast raised to 6.5% on low inflation, oil — UBS
SWISS FINANCIAL services group UBS AG has raised its growth forecast for the Philippines this year, citing low inflation, stable remittances and low oil prices, although it warned of a slowdown next year as oil prices come out of a slump.
Paul Donovan, UBS Investment Bank Senior Analyst said the group expects gross domestic product (GDP) growth this year to settle at 6.5%, up from the previous forecast of 6%.
“Generally, we’re expecting most economies to have better growth this year than last year. For the Philippines, we have a modest increase in growth of about 6.5% this year (due to) the low oil price in particular, which supports the consumer sector,” Mr. Donovan told reporters in a media briefing yesterday.
The government is targeting an even higher 7%-8% expansion for 2015. Last year, economic growth came in at 6.1%, a few points shy of the government’s 6.5%-7.5% target after a five-quarter-high of 6.9% was logged in the three months to December. Crawling farm sector output and weak state spending had weighed on growth for much of last year. In 2013, GDP growth beat the 6%-7% goal by coming in at 7.2%.
Moving forward, Mr. Donovan said the country’s growth “will likely slow down” next year as an oil price rebound produces higher inflation numbers.
“We do think growth will slow down next year and rates will gradually move up as we move up to next year. Inflation will rise next year as the price of oil stabilizes,” he said, adding that this year has seen “unusually low inflation.”
“[The Philippines] is getting a big negative impact on inflation this year. A lot of that is due to low oil prices. You lose that next year, plus the very sluggish peso against the dollar (and) rising oil price… will add to the inflation number,” the UBS economist explained. —