Analysts at Citibank upgraded their forecast for the Philippines gross domestic product (GDP) this year to 6.7 percent after actual growth in the first half accelerated faster than originally expected.
Citibank analysts had to adjust its original forecast of no more than 5.8 percent since actual first-quarter growth reached 7.8 percent (itself adjusted from 7.3 percent)and to 7.9 percent in the second quarter.
“With elevated first-half growth of close to eight percent, we upgraded our GDP growth forecast this year to 6.7 percent from the previous 5.8 percent.
“We continue to assume a moderate downtrend in expenditures and product such that second-half growth may settle at 5.6 percent,” Citi’s lead economist Jun Trinidad said in the bank’s latest policy note.
He forecast domestic demand to average about 5.3 percent with the net imports-to-GDP rising to 8.4 percent in the second half.
“We’re assuming exports easing to 11.1 percent in the second half compared to 25.2 percent in the first half as the lackluster global backdrop and sluggish external demand curb export momentum towards end-year.
“Import demand on the other hand will support domestic demand and inventory changes although second-half growth would settle back to 15 percent year-on-year from 24.1 percent in the first-half,” Trinidad said.
Citi’s baseline macro forecast did not assume the investment-led growth in the first half would carry forward in the second half.
“While construction and capital expenditure spending would still pose favorable estimates, we think their respective growth in the second half would be less robust at 10.3 percent and 8.6 percent.
“Investment project approvals in the first half that grew by a hefty 203 percent would continue to support real investments growth of nine percent in the second half and next year’s expected growth of 7.6 percent,” Trinidad said.
The forecasts also do not assume increase private sector engagement in infrastructure projects envisioned under government’s medium-term investment plan running from 2009 to 2013.
Trinidad said some P400.9 billion in infrastructure projects have been identified for private sector funding or participation.
The bulk of these projects are in transportation and water sectors.
“On average, this assumes that roughly P80 billion per year of investment activity can augment the baseline forecasts, “ he said.
“This annual average investment amount is roughly five percent of our 2011 GDP estimate that can certainly hike overall GDP growth to the nine percent to 10 percent range.
So infrastructure development under the public-private partnership could provide the upside risk in our forecasts in case the Aquino administration’s pursuit of governance deals lead to an investment setting that can entice more pricate capital participation and support the shift to investment-driven growth over the medium term,” Trinidad said.
