MANILA, Philippines - Standard Chartered Bank (SCB) has scaled down its growth forecast for the Philippine economy this year to six percent and 5.7 percent in 2016.
The government is targeting a seven to eight percent growth rate in gross domestic product (GDP) for both 2015 and 2016.
However, SCB economist for Asia Jeff Ng said the Philippine economy has the potential to expand by seven percent next year.
“With the Public-Private Partnership (PPP) projects coming on stream, increased foreign direct investments (FDIs) and the net effect of improved exports, the Philippine economy has the potential of expanding by seven percent next year,” Ng said in a press briefing yesterday.
He said the economy has sound fundamentals with a steady stream of FDI. The economy, which is mainly domestic consumption driven, has been growing over six percent in the past three years.
“Growth will be broad-based, with the upside reasons outweighing the downside reasons,” the SCB economist added.
Import growth has started to recover, thus fueling profit margins of producers and domestic consumption.
Low global oil prices likewise provide an upside to trade and current account balance. Oil prices, however, are forecast to move towards the $50 per barrel in the midterm, and end the year in the vicinity of $80 per barrel.
Labor market dynamics has improved since 2010, with the unemployment rate falling to a new low of six percent in the last quarter of 2014 from a peak of eight percent in 2010.
Exports, meanwhile, had grown an average eight to nine percent per annum in the past three years. Manufactured goods made up 83 percent of total and half of that were electronics.
Inflation this year is likewise forecast to ease at 2.2 percent, or well within the government forecast of less than four percent.
SCB forecasts that the Bangko Sentral ng Pilipinas (BSP) would increase policy rates by another 50 basis points in the last quarter.
Policy tightening is a pre-emptive measure against expected rising inflation next year.
“We forecast 50 bps hikes in the fourth quarter in both reserve repo and special deposit account rates, taking them to 4.5 percent and three percent, respectively,” Ng said.
The peso is expected to move within the 43.50 to the dollar. Remittance inflows would remain resilient and steady at over five percent, with a potential strong upside as the US economy accelerates.