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By Daryll Edisonn D. Saclag, Reporter

Fitch says PHL growth ‘to remain strong’

Posted on January 13, 2015

THE PHILIPPINES is still expected to be one of the fastest-growing economies in emerging Asia this year and next, Fitch Ratings yesterday said, even as pace of expansion in both years will likely fall short of official targets.

“Fitch forecasts [Philippine economic] growth to remain generally strong at 6.2% in 2015 and 6.0% in 2016 and this view is based on the expected steady inflow of overseas remittances and continued strong performance of the business process outsourcing industry,” Sagarika Chandra, associate director for Asia-Pacific Sovereigns at Fitch Ratings, said in an e-mailed response to BusinessWorld.

Ms. Chandra’s estimates are far below the 7-8% gross domestic product (GDP) growth target set by government for this year and 2016.

The forecast for this year, however, is still faster than the 6.0% average seen for emerging Asia, excluding China, while that of 2016 is at a similar rate as with the rest in the region.

The global debt watcher is currently in the process of reviewing its GDP growth estimate for 2014. However, Fitch Ratings head for Asia-Pacific Sovereigns Andrew Colquhoun warned last month that the Philippines could see its 6.3% outlook for 2014 -- already below the official 6.5-7.5% growth target range for that year -- cut following the slower-than-expected economic expansion in the third quarter.

GDP growth averaged just 5.8% in the first nine months of last year after the economy expanded by just 5.3% in the third quarter -- the slowest pace in more than five years.

Socioeconomic Planning Secretary Arsenio M. Balisacan had said in November that the economy would need to have grown at least 8.2% in October-December to hit just the low end of the government’s 6.5-7.5% growth target range for 2014, but economic managers later on acknowledged that quarterly pace would be “difficult” to achieve.

Mr. Balisacan said last month that initial reports showed the fourth quarter could have grown faster than the previous three months.

A sign growth remained challenged in 2014’s final quarter was that low state spending -- which has historically contributed about a tenth to national output and which, together with a contraction of agricultural production, had capped third-quarter economic expansion at a slower-than-expected 5.3% (compared to 7.0% the past year and the second quarter’s 6.4%) -- persisted in October and November as official disbursement targets were missed anew in those months.

The government is scheduled to report 2014 GDP growth data on Jan. 29.

For this year and 2016, Fitch said emerging Asia will “[remain] the world’s strongest-growing region” -- driven by “lower oil prices and faster growth in advanced economies” -- despite external risks. In a report, titled: “Global Volatility to Test Stable Outlooks,” the debt watcher cited “a worse-than-expected shock to global financial conditions associated with the anticipated tightening of US monetary policy” and “a faster-than-expected slowdown in China” as potential risks to economic growth in the region.

The Philippines, however, is “relatively well poised” to withstand any adverse impact from the normalization of US monetary policy, Ms. Chandra said.

“[T]he country does not have large external funding needs in comparison with its peers,” she noted.

“The Philippines has been reporting current account surpluses for last few years and we expect this will continue,” she added.

“Macroeconomic performance and policy management are considered a strength and we consider this trend to remain stable for the Philippines.”