DBS Bank of Singapore kept Friday its previous economic growth forecast for the Philippines this year at 6.1 percent after the fourth-quarter data of 6.3 percent exceeded the bank’s expectations of a 5.7-percent expansion.
“That brought full-year 2015 GDP growth to 5.8 percent, a moderation from the 6.1 percent chalked in 2014. That said, we see enough positives in the data and maintain our 2016 GDP growth forecast at 6.1 percent,” DBS said in a report.
The bank noted that gross fixed capital formation growth increased by 22.5 percent in the fourth quarter versus the same period a year ago. Also, full-year investment growth was solid at 14 percent, well above its expectations for a 9.3-percent expansion.
It said large swings in investment growth were typically driven by construction, which tended to be patchy throughout the year. But it said the main driver in the fourth quarter was the 20-percent jump in durable equipment purchases.
“This could only be a good sign for this year’s outlook. That imports of capital goods continue to grow at double-digit pace also reinforces the strong investment growth story,” DBS said.
It also said even if the agriculture sector might remain under pressure in early-2016, it seemed that the impact on private consumption growth was likely to be limited. It said discretionary spending remained strong in the economy, indicated by how non-food consumption continued to lead overall consumption.
“Another 6-percent consumption growth is on the cards this year. Given the strong momentum in 4Q15, there is a chance that 2016 GDP growth may come in even faster than our forecast,” DBS said.
However, the bank said it was important to watch for the first-quarter 2016 numbers, given the impact of the approaching national elections to the economy. It said while the election campaigning process might provide a boost to consumption growth, the pace of investment growth might also ease ahead of the elections.
It said it would be hardly surprising if the surge in investment last quarter turned out to be partly a front-loading before an election year.
“The impact on monetary policy is clear to us. Bangko Sentral ng Pilipinas maintains its cautious approach for now, amid concerns over the global economy. But with domestic demand staying robust and continuing to support the overall GDP growth outlook, there is no reason why the BSP should turn dovish anytime soon,” DBS said.
Meanwhile, a report from Nomura Global Economics on Friday said economic growth this year might be faster at 6.5 percent, anchored mainly on the belief the coming national elections would further boost spending.
“For 2016, we reiterate our GDP growth forecast of 6.5 percent, which reflects our view that the elections in May 2016 will likely further boost already healthy domestic demand, rather than act as a headwind,” it said.
“We expect more fiscal support to growth from further progress on the implementation of infrastructure projects, which should also crowd in private investment and FDI [foreign direct investment],” Nomura said.
