Metrobank sees above 7% GDP growth

MANILA, Philippines -  Metropolitan Bank & Trust Co. expects the economy to grow by more than seven percent over the next few years if the plan of the Duterte administration to ramp up infrastructure spending is achieved.

In its latest The Economic Weather Report, Metrobank research analyst Pauline May Ann Revillas said the bank expects a growth of between 6.5 and 7.5 percent for the economy this year.

“For 2017, our full-year average forecast range of 6.5 to 7.5 percent is largely hinged on the realization of the government’s infra spending plans. The multiplier effect that will result from the planned infra spending will support GDP growth above the seven percent level,” Revillas said.

The Duterte administration has raised the budget deficit cap to three percent of GDP instead of two percent as it intends to raise infrastructure spending to seven percent of GDP by 2022 from the current level of a little over five percent.

Revillas said consumption spending would still be positive as the value of cash remittance inflows from overseas Filipinos increase amid the stronger dollar.

She added the agriculture sector, a drag to GDP growth on the supply side, is seen to recover this year.

On the other hand, she said the industry and services sector would continue to post positive expansions.

The economy grew 6.8 percent last year from 5.9 percent in 2015 amid robust domestic demand and higher investments.

“The solid performance of the Philippine economy in 2016 highlights the country’s sound fundamentals even amid the highly volatile global economy last year,” Revillas said.

Revillas explained investment spending is a major growth driver as its sustained expansion indicates positive investor and market sentiment on the domestic economy.

“The plan for massive infrastructure spending by the Duterte administration is seen to further boost investment spending growth. The sustained expansion in investment spending is expected to shield the domestic economy from negative externalities and form the backbone for a more inclusive growth,” Revillas said.

According to her, risks to the domestic economy nevertheless remain amid the effects of the still diverse global economic growth and impact of financial market volatilities.

Metrobank sees inflation kicking up to 3.1 percent this year from 1.8 percent last year amid strong upside risks that include base effects, weaker peso, and the rebound in global commodity prices particularly crude oil.

The Bangko Sentral ng Pilipinas (BSP) has set an inflation target of two to four percent between 2017 and 2020.

Revillas said the BSP is seen raising interest rates by 50 basis points this year amid rising inflationary pressure as well as the normalization of interest rates by the US Federal Reserve.