JP Morgan hikes Philippine growth forecast

MANILA, Philippines - US-based JP Morgan raised its forecast for Philippine economic growth this year following the faster-than-estimated expansion in the last quarter of 2014.

“The upward revision of 2015 (estimated) GDP growth forecasts following the better-than-expected (fourth quarter 2014) GDP growth print and the material monetary policy flexibility amid easing inflation and softness in oil prices reinforce the positive macro story of the Philippines,” the financial services giant said in a research note.

JP Morgan now sees the Philippine economy expanding by 6.4 percent this year than its earlier projection of 5.4 percent.

Gross domestic product (GDP), a measure of economic output, grew by a surprising 6.9 percent in the fourth quarter last year, accelerating from the 5.3 percent seen in July to September. This brought the 2014 economic growth to 6.1 percent, still below the government’s 6.5 to 7.5 percent target and also slower than 2013’s stellar 7.2 percent growth.

“The key highlight of the GDP print was the recovery of government spending in the [fourth quarter] which assuages concerns regarding the potential pull factor from the government infrastructure spending bottlenecks,” JP Morgan said.

It noted the government last week committed to further accelerate spending, the lack of which pulled down growth in the third quarter of last year.

“We remain confident on growth over the next few quarters as consumption remains robust and the government is expected to accelerate spending ahead of the six-month moratorium on project approvals prior to the May 2016 national elections,” JP Morgan said.

The government hopes to grow the economy by seven to eight percent this year, fueled by domestic consumption and the service sector amid the run-up to the national polls in 2016.

Meanwhile, British banking giant Standard Chartered forecast growth this year at six percent, noting a faster print could materialize if the government hastens spending and more infrastructure projects are started.

“Growth is likely to be supported by the domestic and external sectors, with low oil prices providing additional upside. Our macro tracker for the Philippines shows that the economy has continued to benefit from solid external demand in recent months,” Standard Chartered said in a separate research note.

“At the same time, inflationary pressures have eased, most notably from energy. Tighter monetary conditions… should rein in inflationary pressures for now,” the bank said.

Standard Chartered stressed that the sound macroeconomic fundamentals should continue supporting the peso even with a strong US dollar.

The banking giant said it expects the peso to settle at 45 to a dollar by mid-2015 and at 43.50:$1 by the end of this year.