Fastest in Asia-Pacific: Maybank Kim Eng sees Philippine GDP at 7%

MANILA, Philippines – Maybank Kim Eng sees the Philippines growing faster than its neighbors in the Asia-Pacific region on the back of robust domestic demand supported by higher spending from the general  elections in May.

In its latest regional research entitled “Six-for-16,” Maybank Kim Eng said the country’s gross domestic product would grow by seven percent this year from the projected six percent last year.

The projected GDP expansion of the Philippines this year would be the fastest in the Association of Southeast Asian Nations (ASEAN) that includes Vietnam with 6.5 percent, Indonesia with five percent, Thailand with 4.5 percent, Malaysia with 4.5 percent, Singapore with two percent, and Taiwan with 1.8 percent.

The GDP growth of the Philippines would even overtake China’s projected expansion of 6.6 percent this year due to the economic slowdown in the world’s largest economy.

Maybank Kim Eng believes the global GDP growth to improve to 3.2 percent this year after slowing down to 3.1 percent last year from 3.4 percent in 2014.

“2016 global growth will remain at the low end of the pre- global financial crisis and post global financial crisis range,” the investment bank said.

Global GDP growth reached 5.7 percent in 2007 before slowing down to 3.1 percent in 2008 due to the global financial crisis. The world plunged into recession in 2009.

Maybank Kim Eng said major advanced economies are expected to maintain their growth momentum this year at 1.9 percent with the US expanding 2.3 percent followed by the United Kingdom with 2.2 percent, Eurozone with 1.7 percent, and Japan with one percent.

The investment bank said 2016 would be eventful for the Philippines with national and local elections set for May 9, and President Aquino scheduled to step down this June ending his six-year term.

Presidential bets include administration candidate Manuel Roxas II, Vice President Jejomar Binay, Senators Grace Poe and Miriam Defensor-Santiago, as well as Davao City Mayor Rodrigo Duterte.

“All candidates profess to strengthen economic reforms, improve infrastructure, reduce criminality, and address the Mindanao issue. We believe policies that have led to improving economic fundamentals over the years will be maintained. What will differentiate each candidate is the focus and speed of implementing their programs,” the bank said.

The country’s GDP growth accelerated to six percent in the third quarter from the revised 5.8 percent in the second quarter of last year due to robust demand and improving government spending.

The expansion averaged 5.6 percent in the first nine months of last year, way below the seven- to eight-percent growth penned by economic managers due to weak global demand and lack of government spending.

On the other hand, inflation eased to 1.4 percent last year from 4.1 percent in 2014 due to stable food prices and cheaper utility rates brought about by declining oil price in the world market.

This allowed the Bangko Sentral ng Pilipinas (BSP) to keep interest rates unchanged since October 2014. The overnight borrowing rate is currently pegged at four percent, the overnight lending at six percent, and the special deposit account rate at 2.5 percent.

Maybank Kim Eng believes the BSP’s Monetary Board would gradually tighten monetary policy since economic growth remains healthy.

“The Philippines and Vietnam have room to cut interest rates in view of them having the highest real interest rates but have not done so amid growth outperformance relative to regional peers,” the bank added.