News Analysis: Philippines to see sluggish growth in 2015

MANILA, Philippines (Xinhua) - After three consecutive years of robust economic growth, the Philippine economy, one of the fastest growing in the region, will likely slow down in 2015.

In research note issued yesterday, the Hong Kong and Shanghai Banking Corp.(HSBC) said that Philippine economy will grow at a slower pace in 2015 in anticipation of more cautious investment spending ahead of the country's presidential election in 2016.  

HSBC economist Trinh Nguyen projected that the country's gross domestic product(GDP) growth in 2015 may decelerate to 5.4 percent from an estimated 5.7 percent in 2014.

The concern among many investors now is whether the next administration would sustain the governance reforms started by the Aquino administration, Nguyen said.

While lower spending costs arising from a benign inflation environment could keep private consumption robust, Nguyen said sluggish investment could drag down growth.

"Fiscal spending, although expected to pick up slightly, will likely fall short of the amount allotted for 2015. Therefore, we expect 2015 growth momentum to slow to 5.4 percent," she said.

The Philippine economy grew by 7.2 percent in 2013 and 6.8 percent in 2012. While final figures are still being tallied, government economic managers have said year-round growth in 2014 could be between 6 percent to 7 percent.

Socioeconomic Planning Secretary Arsenio M. Balisacan said earlier that the country's GDP would likely expand within the lower end of government's full-year forecast of 6.5 percent to 7.5 percent.

"The higher end is already very challenging," Balisacan said in late November at a forum sponsored by the Philippine Economic Society.

Nonetheless, he said government would remain focused on a 7 percent to 8 percent growth rate in GDP every year, for the next two to three years.

But analysts, economists and fund managers have downgraded their Philippine economic growth forecasts in 2014 to below 6 percent due to a slowdown in third quarter performance.

The Philippines had a disappointing 5.3 percent economic growth in the third quarter of 2014.

HSBC and Maybank Kim Eng revised their full-year GDP growth last year to 5.9 percent, while ING Bank was a little more pessimistic with 5.8 percent.

Maybank Kim Eng chief economist Luz Lorenzo said that government under-spending was one of the major drags last year.

Meanwhile, the Bangko Sentral ng Pilipinas(BSP), the country's central bank, said that it is treading carefully as markets brace for a rise in interest rates in the US which could lead to massive capital outflows from the Philippines.

"We have to be very careful in terms of monetary policy. While it's true that inflation is trending downwards, we have to weigh this relative to the expected tightening of the United States monetary policy," BSP Deputy Governor Diwa C. Guinigundo said.

"If there is a severe reaction to the United States tightening, some cross-border outflows of capital can ensue. That can influence demand for dollars," Guinigundo said.

The United Stats Federal Reserve last month signaled interest rates may start rising this year although Fed chairman Janet Yellen said rates would remain near-zero for "at least a couple of meetings."