MANILA (Mabuhay) — HSBC raised its full-year growth forecast for the Philippines to 7.1%, on the back of better-than-expected second quarter GDP figures.
In a report, HSBC economist, Trinh Nguyen said the second quarter growth data showed that momentum remains strong, due to robust investment spending and private consumption. The economy grew by 7.6% in the first half.
“We expect a recovery in global demand to boost exports and remittances in 4Q 2013, supporting a growth rate of 7.1% for 2013,” Nguyen said.
HSBC earlier forecast 6.4% GDP growth for 2013.
“The Philippines remains one of the world’s economic bright spots. A recent improvement in fiscal and monetary policy management has reduced the external debt burden, contained inflation, and created more scope to support growth,” she said.
Nguyen noted the government’s savings will make space for much-needed infrastructure spending.
“The budget deficit has remained below 2.5% of GDP in the past two years and we expect this to continue. Both short-term external and total external debt loads have been reduced significantly, limiting the country’s risk profile,” she said.
HSBC also estimated inflation will likely be at the lower end of the Bangko Sentral’s 3-5% target band in the next six months.
In the medium-term, HSBC said the outlook for the Philippine economy remains bright due to “prudent management and favorable demographics: inflation is benign, FX reserves are ample and external debt is falling.”
“We believe both the fiscal position and growth environment in the Philippines should continue to brighten thanks to prudent management of the economy as well as the country’s increasingly favorable demographic transition,” Nguyen said.
HSBC noted from 2013 to 2050, on average, there will be two working age Filipino for every dependent, up from an average ratio of one between 1970 and 2000.
“This gives the country a chance to save significantly and make the necessary investment. Unfavorable demographics coupled with a loss of manufacturing jobs and weak government previously caused the Philippines to stagnate relative to Singapore, Malaysia, Indonesia, and Thailand,” Nguyen said.
“But the tide is turning. Given the savings made thus far and the improvement in the management of the economy, rising investment could see growth accelerate above the previous 5% trend growth rate in the coming years.” (MNS)