A slower-than-forecast expansion in the manufacturing sector was seen dragging local output, measured as the GDP, also lower not just this year but in 2016 as well, according to analysts at DBS Bank.
Its analysts acknowledged that the Philippines has created a number of buffers that help shield its $285-billion economy from a withering global slowdown, but maintained that the slower growth in advanced economies translates to a weaker manufacturing sector going into next year.
Thus, the slowdown in the manufacturing sector is an event “risk to the continued and possible resurgence of strong growth next year,” DBS Bank economist Gundy
Cahyadi said.
The country’s export performance has proven a disappointment for most of 2015, as external demand continues to slacken due to the slow and uneven pace of growth in some of the country’s major trading partners.
Nevertheless, this weakness had somehow been offset by strong domestic consumption that should help allow the Philippines to post estimated growth of 5 percent this year even as peers in the region struggle to post more modest outcomes.
But for 2016, the Singaporean lender warned of a major risk going into next year arising “from the global economy and how that may have a deeper impact on the domestic manufacturing sector.”
Cahyadi did not detail the expected hit on the manufacturing sector for 2016 where he forecast a 6.1-percent growth that year, which is faster than actual first-half growth in 2015 of only 5.3 percent. The DBS economist also forecast growth averaging 5.7 percent this year even as he anticipated an acceleration in the third quarter of 6.2 percent.
“Exports growth was disappointing in third quarter, but the main support for the economy is domestic demand. On this front, we remain quite positive—private consumption growth is still on track to reach 6 percent this year. Underlying demand is healthy, underpinned by real income growth that remains steady at an average 4 percent since 2012,” Cahyadi said.
“Ahead of next year’s elections, there are concerns that the pace of project completion may slow down. Still, we reckon that chances are high that we are going to see close to double digit again this year,” he added.
The economist also said despite a more benign inflation outlook, the Bangko Sentral ng Pilipinas continues to keep interest rates steady for now given the country’s sustained growth outlook.
The Philippines Statistics Authority is scheduled to release the full details to the third-quarter performance of the economy on Thursday.