S&P hikes Phl GDP to 6% this year
Debt watcher Standard & Poor ’ s (S&P) is looking at a higher economic growth for the Philippines this year and next year due to strong private consumption and a robust business process outsourcing (BPO) sector.
In a report, S& P said the country’s gross domestic product ( GDP) is expected to grow by six percent this year and 6.3 percent next year.
This year ’ s growth projection is higher than the 5.6 percent forecast set by S&P in September last year.
The country’s GDP growth slowed down to 5.8 percent last year from 6.1 percent in 2014.
The government missed its seven to eight percent GDP growth target last year, prompting economic managers to lower the growth targets from 6.8 to 7.8 percent.
The projected GDP growth for the Philippines this year is faster than Indonesia’s five percent, Malaysia’s 4.8 percent, Thailand’s three percent, Singapore’s 2.1 percent and Taiwan’s 1.8 percent.
“As usual, the growth story for the major Southeast Asian economies ( Indonesia, Malaysia, the Philippines and Thailand) is a mixed bag. Indonesia’s growth may have bottomed, but growth is unlikely to rebound strongly,” the debt watcher said.
S&P said the Philippines has been a bright spot, with strong growth driven by consumption and business process outsourcing, although there is some political transition risk as well due to this year’s elections.
The rating agency sees inflation kicking up to 2.5 percent this year and 3.3 percent next year.
Inflation eased to 1.4 percent last year from 4.1 percent in 2014 due to stable food prices and cheaper utility rates. The Bangko Sentral ng Pilipinas (BSP) has set an inflation target of between two and four percent.
S&P said the lag effect from China’s economic slowdown and weak commodity prices are still working their way through the region.
It added the adoption of negative official interest rates in Japan and Europe, slowdown in raising official interest rates in the US, and the reloosening by Chinese authorities of bank lending early this year merely stretch out the adjustment period of Asia’s credit down cycle from its highs.
“While the region will still be led by China and likely still outperform the rest of the global economy, Asia-Pacific will need to adapt to ensure continued relatively strong, balanced and sustainable growth,” it added.
S&P expects the BSP to raise interest rates by 25 basis points this year and by another 50 basis points next year with the normalization of interest rates by the US Federal Reserve.
“With growth slower for longer, we see monetary policy as being more accommodative for longer. The recent change in our forecast for the US Fed rate normalization process – with just two 25 basis point hikes in 2016 underscores this. Leaving aside the special case of Japan, a slower Fed normalization combined with lingering output gaps means that central banks are likely to stay lower for longer in Asia Pacific,” it said.