S&P raises Philippine GDP growth projection

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Merchandise exports are on the upswing in Asia and the Pacific, as economic recovery of developed markets picks up.

S&P Global Ratings has increased its Philippine economic growth projection in the face of upbeat consumer demand and a surge in electronics exports.

The credit rater now sees Philippine gross domestic product (GDP) expanding by 6.6% in 2017, just above the low end of the government’s 6.5-7.5% growth goal for the year.

S&P analysts noted that the “upturn in global growth and trade” that has boosted demand — particularly for electronics products — will lift exports from Asia-Pacific economies.

This will add to already robust domestic consumption across Southeast Asian economies.

“Domestic demand looks stable for the next few years in the region,” S&P said in a Nov. 28 report.

“Malaysia, Thailand and the Philippines are part of the global electronics supply chain and have benefitted this year from the electronics recovery, while Indonesia has gained from higher commodity prices.”

Outbound shipment of Philippine goods had grown by 12.2% as of end-September, turning around from a 4.4% decline recorded in 2016’s comparable nine months, according to the Philippine Statistics Authority.

Previously, S&P gave a 6.4% growth forecast for Philippine economic growth, just below the official growth target.

Philippine GDP grew by a faster-than-expected pace of 6.9% in the third quarter, a rate deemed “impressive” by the debt watcher. This brought the year-to-date pace to a 6.7% climb, well within target.

The Philippine economy expanded by 6.9% in 2016, helped partly by a boost from spending related to last year’s national and local elections.

Economic managers have said that GDP growth should pick up this quarter as the government continues to improve spending, particularly on infrastructure and social services, and as household spending spikes as Christmas approaches.

Annual economic growth across member-states of the Association of Southeast Asian Nations is seen to average 5.1% for 2017 and 2018, picking up from the 4.8% pace posted a year ago.

Trade-related risks have “diminished,” as threats from policy shifts in the United States are expected to have abated following the visit of President Donald J. Trump in Asia. That, in turn, had helped ease trade tensions with China and — at least momentarily — geopolitical threats in the Korean peninsula.

“Unexpected financial market turbulence around the path of US monetary policy normalization remains on our risk list,” S&P said, even as analysts noted that global markets have priced in the much-anticipated rate hike this December and at least two more next year.

“Risks to the outlook include potential capital outflow pressures arising from changes in global monetary conditions and any unexpected slowdown in external demand.”

The Bangko Sentral ng Pilipinas has said that while a fresh Fed rate hike could trigger short-term volatility, the monetary authority stands well-equipped to weather such headwinds by deploying its policy tools as necessary. — Melissa Luz T. Lopez

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