HSBC says economy on a roll, expects 6.9% growth
British banking giant HSBC has raised its Philippine economic growth forecast to 6.9 percent in 2007 from 6.5 percent and maintained its 5.8 percent projection for this year.
“The Philippines is on a roll,” HSBC said in its outlook for 2008. “The peso, shedding much of its historic stigma, has been among the best performers in Asia this year, rising an impressive 16 percent against the dollar.”
HSBC said it raised its growth forecast for 2007 as latest data showed that the economy was consistently strong.
“The economy remains supported by surging remittances, fueling a boom in consumption that appears difficult to sustain but the fiscal deficit, long the economy’s Achilles’ heel, continues to contract, lending some valuable stability,” the bank said.
With the considerable narrowing of the budget deficit and the impressive strides made in reducing the public sector debt, HSBC said “government has bought itself time to put its house in order” although it remains “skeptical about the outlook for revenue growth.” It noted that privatization had a lot to do with the improving public finances.
HSBC said the government faced challenges in investments and inflation.
“Investment is still underperforming despite a series of interest rate cuts over the past year,” HSBC said. The bank blamed slow investments to structural bottlenecks that might be hindering greater capital expenditure.
“The country’s export performance has sagged of late, suggesting that competitiveness is suffering,” HSBC said. “Greater infrastructure expenditure in the next two years should help spur at least a gradual rebound in investment.”
HSBC said inflation in the Philippines had surprised on the low side despite spiraling oil prices that allowed the central bank to cut its rates.
It expects the base effects of higher oil prices on inflation to start kicking in this year. Eileen A. Mencias
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