MANILA, Philippines – The Union Bank of Switzerland (UBS) has revised upward its 2012 economic growth forecast for the Philippines to 5.8 percent from 4.5 percent previously because of the stronger-than-projected second quarter growth performance.
The economy grew by 5.9 percent in the second quarter of the year, beating most analysts’ expectations of 5.5 percent and UBS’ forecast of 3.7 percent for the quarter.
According to the National Statistical Coordination Board (NSCB), sustained growth of the services sector and improved government spending were among the contributors of growth during the period.
UBS’ 5.8 percent full-year growth forecast for the year is within the official target range of five percent to six percent for 2012. Next year, the government is eyeing a growth of six percent to seven percent.
However, in its latest report, UBS said there is no upward adjustment of its 4.7 percent growth forecast for 2013.
It said that while there are positive signs of investment growth, there are also weaker indicators of trade momentum going forward.
UBS also said that manufacturing slowed down in the second quarter compared to first quarter growth. It said that growth in the third quarter may still not be able to match the strong 6.4 percent growth in the first quarter of the year.
“Neither Philippine nor global lead indicators suggest a strong bounce-back in the third quarter of the year,” UBS said.
On the monetary side, UBS said the Bangko Sentral ng Pilipinas is likely to use macro prudential measures rather than policy rate adjustments in the immediate future.
“The tighter limits on bank exposure to real estate announced on Aug. 23 suggests no further policy rate cuts, while the concern over growth and capital inflows suggests no hikes,” UBS said.
It expects the peso to hit an average of 42 to the dollar by yearend.