Banks cut Philippine GDP forecast to below 6%

MANILA, Philippines - Investment banks slashed the country’s economic growth forecast to below six percent despite picking up in the second quarter of the year.

Daniel Martin, senior Asia economist at Capital Economics, said the country’s gross domestic product (GDP) is likely to expand by 5.7 percent instead of six percent this year after the disappointing data for the second quarter.

The country’s GDP grew 5.6 percent in the second quarter of the year from 6.4 percent in the same quarter last year due to weak global demand and lack of government spending.

The GDP expansion in the second quarter was faster than the revised five-percent growth penned in the first quarter amid the improving government spending and strong domestic consumption.

Barclays regional economist Raul Bajoria said the British-owned investment bank lowered its GDP growth forecast for the Philippines to 5.5 percent instead of 6.5 percent this year due to slower than expected government spending and weaker external demand.

“Overall, despite the cut in our growth forecast, we expect the Philippines to continue to outperform the other Asean economies, with the country set to be the fastest growing economy among the major Asean economies for a third consecutive year in 2015,” Bajoria said.

Standard Chartered Bank economist for Southeast Asia Jeff Ng said the Philippines is on its way to recording a 5.7 percent GDP growth this year and six percent next year.

“We believe the economy is on track to grow 5.7 percent this year and six percent next year. The domestic economy remains solid. Philippines’ household consumption outperformed that of other Asean economies over the past four to five years,” Ng said.

On the other hand, Metropolitan Bank & Trust Co. (Metrobank) scaled down its GDP growth forecast to six percent instead of 6.4 percent this year despite the expected pick up in government spending in the second half.

Metrobank analyst Pauline May Ann Revillas said higher government spending would help sustain the growth in investment spending and would also further boost consumption spending.

She added the services and industry sectors are still expected to post solid growths in the coming quarters while the agri sector is seen to remain weak amid soft food prices and the impact of the El Niño phenomenon.

“Risks to the domestic economy remain amid the effects of the El Niño phenomenon, uneven global economy, and impact of financial market volatilities,” she said.

The Philippines recorded a GDP growth of 5.3 percent in the first half of the year, slower compared to 6.4 percent in the same period last year. This was way below the GDP growth of seven to eight percent penned by economic managers for 2015.

Socioeconomic Planning Secretary Arsenio Balisacan earlier said the country’s GDP growth would likely settle between six percent and 6.5 percent this year.