HSBC is still positive for a good turnout of the Philippine economy in 2015 amid negative factors both here and overseas.
The Philippines has proven its worth in recent years after posting above-trend growth but HSBC noted that the country is not immune to external factors as shown by the drop in exports in the first quarter of 2015.
The domestic economy, which has been turning in an above five percent growth at least in the past three years, is now among the top three in the region buoyed by strong domestic consumption and private investment.
In 2014, growth stood at 6.1 percent, lower than the government’s 6.5-7.5 percent due mainly to the impact of port congestion in the first three quarters of the year.
However, output in the fourth quarter rebounded to 6.6 percent from the last quarter’s 5.5 percent boosted by strong construction spending, net exports and robust private consumption. On the other hand, turnout in the first quarter of 2015 weakened at 5.2 percent due largely to weak government spending and net exports.
But even with the difficult external environment and its impact on the domestic economy as well as domestic-related factors, HSBC believes that the Philippines will continue to be strong with growth eyed at 5.6 percent, which, on the other hand, is lower than the government’s 7-8 percent target for this and next year.
It considers government spending, due to among others public-private partnership (PPP) initiative and infrastructure investment, as among the risks to growth. However, it expects “private consumption and investment to pick up the slack.”
“Should government spending slow more than expected and household expenditure weaken (not our assumption), then growth may slow sharply,” HSBC said.
Another risk factor is capital outflow because of the looming hike in the Federal Reserve rates and developments in Europe, among others. This factor is seen to weaken the local currency but HSBC said “the BSP (Bangko Sentral ng Pilipinas) has ample foreign reserves to support the currency.”
“That said, we believe weakness from the external factors will motivate the BSP to tolerate some [peso] weakness, while keeping rates on hold,” it added.