Phl growth may still be good for 2nd in Asia, says UBS

MANILA, Philippines - Philippine economic growth could still be the second highest in Asia after China next year, UBS said in a report.

“The Philippines stands out on growth within the region. Low oil prices, election spending and a weaker US dollar could boost consumption,” the bank said.

UBS has forecast growth to hit six percent next year but to slow down to 5.8 percent in 2016. The forecasts are both below the government’s seven-to eightpercent target for next year and the 7.5-to 8.5-percent goal for 2016.

“Election spending — which we estimate could boost GDP by about 0.5 percent—and low oil prices could lift consumption spending,” the bank said.

“We also expect the exchange rate to weaken to P47 by end-2015 — this could result in increased spending power for overseas Filipino workers and boost exports,” the bank said.

Remittances support domestic consumption, the main driver of the Philippine economy. In 2013, cash remittances amounted to $22.968 billion, making up more than eight percent of the country’s GDP.

Philippine economic growth decelerated to 5.3 percent in the third quarter from six percent in the second quarter. While government officials forecast an acceleration in growth for the last quarter of the year, analysts doubt the expansion could hit the 6.5-to 7.5-percent target for the year.

UBS said growth next year would also be supported by a manageable inflation environment, which should further support household spending.

“Inflation risk has diminished after the government implemented monetary tightening measures… However, we expect inflation to remain above its 2015 target of two to four percent, which could add impetus to more rate hikes in the future,” UBS said.