HSBC slightly raises PH growth forecast
London- based Hong Kong and Shanghai Banking Corp. (HSBC) has slightly raised its economic growth forecast for the Philippines amid the expected spike in public spending in the first-semester of the year.
In its latest report for Asia, HSBC said the country’s economy, as measured by gross domestic product (GDP), may grow 5.8 percent this year, marginally higher compared with an earlier forecast of 5.7 percent.
“The strong momentum in government spending will be continued into first-half of 2016, and we revise higher our 2016 GDP forecast to 5.8 percent from 5.7 percent previously, however, we still expect momentum to decelerate in second half of 2016,” HSBC said.
“From a supply perspective, there was a healthy pick- up in both services and industry, more than offsetting a decline in agriculture output streaming from El Niño induced drought,” the lender added.
However, HSBC’s latest GDP growth forecast is below the 6.8 percent to 7.8 percent target set by interagency Development Budget Coordination Committee (DBCC).
In 2015, Philippine GDP expanded by 6.3 percent year- on- year in the fourth- quarter, bringing full year growth to 5.8 percent, which was lower than government’s 6.0 percent goal.
But HSBC said Philippines’ 2015 economic expansion “nonetheless a relative out-performer in the region.”
Meanwhile, HSBC expects overseas Filipino remittances would remain steady this year despite increasing concerns that the sector may be impacted by low oil prices and the slowdown in growth in the Middle East.
“While we forecast a moderation in remittances growth from the Gulf Region, growth is expected to remain steady elsewhere, which should offset the moderation,” HSBC said.
“Moreover, the decline in remittances from the US due to regulatory reasons will likely end up flowing into the Philippines through other channels,” the lender said.
For the central bank’s policy settings, HSBC pencilled in a 25 basis point cut for operational purposes due to the implementation of the Interest Rate Corridor.
The Bangko Sentral ng Pilipinas (BSP), in its February meeting kept both the overnight borrowing rate and special deposit account rate on hold at 4.00 percent and 2.50 percent, respectively.
Given manageable inflation of 1.3 percent in January, which was below BSP’s two percent to four percent target, interest rates will likely be steady according to monetary policy board.
“Further, they said that downward pressure on inflation could arise from slower than expected global economic activity and lower international oil prices while upside risks could come from prolonged El Niño,” HSBC said.