Standard Chartered cuts Philippine GDP forecast

MANILA, Philippines – Standard Chartered Bank slashed its economic growth prospects for the Philippines in 2017 due to slower-than-expected performance in the 1st quarter. But the British banking giant remains optimistic that the Philippines will still end up the fastest growing economy in the region this year.

Edward Lee, head of Association of Southeast Asian Nations (ASEAN) economic research at StanChart, said the bank now expects the Philippines' gross domestic product (GDP) to expand by 6.5% instead of 6.8% in 2017.

The revised projection for 2017 is also slower than the 6.9% GDP growth recorded in 2016, which was driven by election-related spending. 

"We expect GDP growth to slow in 2017 versus 2016, but to remain the fastest in ASEAN-6," Lee said in the bank's 2017 mid-year global research briefing on Tuesday, August 1.

The projected GDP growth for the Philippines this year is higher than StanChart's 2017 outlook for Vietnam (6.4%), Indonesia (5.2%), Malaysia (4.6%), Thailand (3.5%), Singapore (2%), and Taiwan (1.9%).

Lee said the Philippine economic growth forecast was cut to reflect the disappointing GDP expansion booked in the 1st quarter of the year, which was largely due to weak investment growth. (READ: Under Duterte, is PH economy in good hands?)

The Philippines emerged as one of the fastest growing economies in the region in the 1st quarter of 2017 despite the slowdown in GDP growth, closing at 6.4% from 6.6% in the 4th quarter of 2016.

Better 2nd half

Several economists see growth picking up in the 2nd half due to infrastructure investments.

For 2018, Lee said StanChart expects the Philippines to register 6.5% GDP growth. (READ: PH economy to march on despite political risks – Oxford Business Group)

Economic managers, through the Development Budget Coordination Committee (DBCC), have set a GDP growth target of 6.5% to 7.5% for 2017 and 7% to 8% for 2018. 

Lee added that household spending would remain steady as remittances from Filipinos abroad are expected to grow between 4% and 6% this year.

He also noted that the bank sees inflation in the Philippines accelerating to 3.1% this year and easing to 3% in 2018, from 1.8% last year, due to higher oil prices and transport fares as well as costlier utility rates.

The Bangko Sentral ng Pilipinas (BSP) has set an inflation target of between 2% and 4% from 2017 to 2020.

Lee said the BSP is expected to keep interest rates unchanged throughout this year and next year. –