S&P eyes 6-6.5% GDP growth for PHL this ’17

MANILA — Debt rater Standard & Poor’s (S&P) forecasts an average growth of between six to 6.5 percent for the Philippine economy this 2017 given the strong expansion of consumption and investments.

“GDP growth of six percent to 6.5 percent is still easily achievable for the Philippines,” it said in report released Wednesday.

The upper end of S&P’s growth projection is the lower end of the government’s 6.5 to 7.5 percent target for this year.

In 2016, GDP grew by 6.8 percent, near the upper end of the government’s six to seven percent target.

The report said gross domestic product (GDP) continues to be fueled by “solid consumption and investments.”

“A growing middle class continues to support domestic demand,” it said.

Private consumption is seen to get additional support from the weakness of the peso against the dollar since depreciation of the local unit against the greenback translates to higher peso value of remittances.

However, S&P said risks from the “potential decline in confidence due to global market and/or geopolitical uncertainty, on top of the previous risks related to a sharper-than-expected downturn in China’s growth” remain.

Inflation is seen to “significantly” rise this year due to strong domestic growth and the possible approval of the government’s proposal to hike excise taxes on fuel and vehicles.

“But given the low starting point, it is not a big concern,” it said.

Rate of price increases in the first month this year rose to 2.7 percent from month-ago’s 2.6 percent.

Monetary officials expect inflation to sustain its rise partly due to increases in oil prices in the international market but it is not expected to exceed the government’s two to four percent target.

Inflation went up back to within target levels starting in September last year when it jumped to 2.3 percent from the previous month’s 1.8 percent because of continued increases in oil prices.

With the expected rise of inflation “we expect the BSP to begin raising interest rates in response,” the report said.

To date, the Bangko Sentral ng Pilipinas’ (BSP) overnight borrowing or reverse repurchase (RRP) rate is three percent, the overnight lending or repurchase (RP) rate is 3.5 percent and the rate of the special deposit account (SDA) is 2.5 percent. (PNA)

Source: Philippines News Agency