THE country’s outlook for its output expansion looked bleaker, after the Philippines’s disappointing third-quarter gross domestic product (GDP) figure, prompting the research arm of an international credit watcher to review its growth forecast for the country for possible downward revision.
Moody’s Analytics senior economist Glenn Levine confirmed to the BusinessMirror that their official growth forecast for the Philippines—which is currently at 5.8 percent—will be revised lower, after the third-quarter GDP came in “well below expectations.”
“Some of it was because of inventories, which may rebound a little in the December quarter, but even so, it is unlikely to be strong enough to push full-year growth to 5.9 percent,” Levine told the BusinessMirror.
The Philippine Statistics Authority announced in the previous week that the Philippine economy faltered to a slower growth in the months of July to September this year—to hit 5.3 percent during the period—with the Aquno administration’s underspending as the largest drag to the local economy during the period.
While official forecasts of Moody’s Analytics on Philippine growth are yet to be released, Levine said that the fourth-quarter GDP may fall at around 5.6 percent, to push the full-year growth of the country to 5.7 percent, “feels just about right.”
If Moody’s Analytics’s growth forecast for the Philippines is actualized, the country will be growing well below the government’s target growth range for the year at 6.5 percent to 7.5 percent for 2014.
It is, likewise, a sharp deceleration from 2013’s stellar GDP performance, seen at 7.2 percent during the period.
Levine also said that while the country has grown slower in the previous quarter, this is still within the Philippines’s potential GDP growth rate, which is around 5.5 percent.
“The economy has been growing above this for several quarters but will eventually revert toward this rate,” the Moody’s Analytics senior economist said.
Despite the lower rate compared to the previous year, Levine said the country will still remain attractive to global investors due to improvement in its risk profile.
“A reversion toward 5.5-percent GDP growth is still attractive to overseas, given the Philippines’s falling risk profile. Europe will remain weak, and much of Asia is struggling, both of which are positive for the Philippines in the eyes of global investors,” Levine said.
Nomura’s 2015 GDP projection
THE country’s GDP is forecast at 6.8 percent in 2015, but the May 2016 election poses a risk to the positive outlook.
Nomura Global markets research said the economic growth of 6.8 percent is driven by double-digit growth in investment spending, which, in turn, is led by the government’s drive to double public infrastructure spending by 2016 to 5 percent to 6 percent of the GDP.
The Philippines maintains its solid fundamentals, with tax-revenue growth continuing to outpace nominal GDP growth. There is ample fiscal space to support higher public-investment spending and keep the fiscal position in check, Nomura analysts said.
“Public debt to GDP [ratio] continued to fall in 2014 to 51.3 percent, and we forecast next year’s fiscal deficit to stay at 2 percent of GDP, in line with the medium-term target,” the analysts added.
Nomura said the main issue to watch for is who will President Aquino nominate or anoint as his potential successor.
“A key risk to our positive outlook comes from the May 2016 elections, which could start to weigh on sentiment as early as the second half of next year,” Nomura analysts said.
Genivi Factao