Phl remains star performer – Nomura

The Philippines remains a “star performer” among countries in Asia despite the setbacks, brought about by Super Typhoon Yolanda, according to Nomura Securities Global Economic Outlook.

“In our view, the disaster, as tragic as it is, does not alter the economy’s strong fundamentals: the combination of strong growth, a solid external surplus, stable politics and still- positive reform prospects sets the Philippines apart from its regional peers. If anything, we believe the typhoon could be a catalyst for even more infrastructure implementation,” it said.

ut omura said it has decided to lower its growth forecast for the hilippines to take into consideration the impact of the natural disaster

to the hilippine economy

“ e lowered our growth forecast for to percent from percent, taking into account the impact of the typhoon in the fourth uarter, it said

owever, omura raised its growth forecast to percent from percent, noting that reconstruction will spur economic activity in the months ahead

It pointed out that there would be a lot of reasons for the hilippine economy to grow even faster next year

“Financing will not be a constraint as the government has plenty of fiscal space, plus remittances from overseas workers are also ris ing, it said

“As a result, we expect the fiscal deficit to widen only slightly to percent of from percent in , it added

omura said investment spending is likely to continue to be a bigger contributor to growth

“ till, we expect the current account surplus to remain solid, increasing further to four percent of in from percent, led by worker remittances as well as revenues from a booming business processing outsourcing sector, it said

In addition, it said it expects F I (foreign direct investments) inflows will begin to pick up more substantially in , directed into services related sectors initially and, further out, manufacturing

“ his is being supported by a marked im provement in the business climate, further progress in governance reforms, an investment

grade rating and the prospect of liberalization of foreign ownership restrictions in certain sectors,” it said.

The overall balance of payments position, it said, should be able to easily withstand the risk of capital outflows brought on by the start of the US Federal Reserve’s tapering program.

Given the strength of the economy and additional supply-side pressures from the typhoon, Nomura forecasts inflation to rise four percent in 2014 from 2.9 percent, still within the Bangko Sentral ng Pilipinast three-to fivepercent target.

With the expected rise in inflation, Nomura said it expects the BSP to start hiking its policy rate in the second quarter of 2014, raising it by 100 basis point to 4.5 percent by end-2014.

“This is relatively aggressive, but we believe BSP will be proactive in containing inflation risks, mindful of the narrowing output gap, loose liquidity conditions and the prospect of a normalization in global monetary policy,” it said.