Banks upgrade Phl growth forecast

MANILA, Philippines – Local and foreign banks have upgraded their growth forecasts for the Philippines this year on expectations that robust consumer spending and investments would thwart the impact of still-weak trade demand.

In separate reports released Friday, HSBC and Metropolitan Bank and Trust Co. (Metrobank) both revised upwards their growth projections for the local economy to 6.4 percent and seven percent, respectively.

HSBC earlier forecast a 5.9-percent growth, while Metrobank predicted in a six-percent uptick. Gross domestic product (GDP) expanded 6.8 percent last year, while the first-quarter figure registered at a better than-expected 7.8 percent.

The outlooks fall within the Aquino administration’s six- to seven-percent target for the year.

According to HSBC, “resilient” remittances from overseas Filipinos are expected to support domestic spending of consumers and investors. A stable rise in consumer prices could also contribute to purchasing power.

Based on HSBC’s estimates, inflation is expected to fall to 2.9 percent this year, slower than last year’s 3.2 percent, and falling below the central bank’s three- to five-percent target.

This, the bank said, will be due to “abundant food supply and low global commodity prices” which translate to lower transportation costs. As of the first half, inflation averaged at 2.9 percent.

“Increased government spending as well as loose monetary policy are expected to step in to counter weak global demand,” HSBC pointed out.

“Benign inflationary pressures have given space for the central bank to keep main policy rates for now,” it added.

The Bangko Sentral ng Pilipinas (BSP) would likely keep policy rates at record-lows of 3.5 percent and 5.5 percent this year, helping supply cheap credit to support economic activity. The return on special deposit accounts (SDA) will also likely be kept at low rates.

“With the volatility in asset markets, the BSP will adopt a wait-and-see mode in the mean time,” HSBC said.

Meanwhile, Metrobank expects consumer spending and private construction to drive growth this year.

It said the private sector would likely contribute more to expansion going forward, especially on the real estate sector, one of the key drivers of first quarter growth. On the services sector, tourism would be a game changer.

“The remarkable expansions in investment spending and the manufacturing sub-sector have been a major push to GDP growth…which when sustained would lay the foundation for a more sustainable and inclusive growth moving forward,” Metrobank explained.

Among other forecasts, the local lender also sees a “stable” peso-dollar exchange rate by year-end at 41.50, weaker than the 41.05 achieved by end-2012, given the volatility in the foreign exchange market.

“A sharp depreciation is not seen as the BSP continues to intervene and smoothen exchange rate volatilities,” it said. –Prinz P. Magtulis (The Philippine Star)