Strong growth to continue, says DBS

Singapore-headquartered investment bank DBS expects a strong expansion in the Philippine economy to be sustained in the coming years as it continues to see major contribution of investments.

In a research note, DBS projects a 6.7 percent growth for the Philippines this 2016 and a 6.4 percent output next year, with the slower expansion in 2017 attributed to impact of possible moderation of investments.

It explained that full year investment growth this year is projected to be at record-high of over 20 percent.

“This is a major driver for the economy, which has grown by seven percent so far this year, among the fastest in the region,” it said.

The current government bids to further increase spending, especially on infrastructure, yet the research note forecasts growth of investments to decelerate on back of “inventory build-up over the past years.”

“There have been no material de-stocking activities since 2Q13. De-stocking looks imminent and once it happens, investment growth should moderate next year,” it cited.

However, DBS pointed out that “from a longer-term growth sustainability point of view, this may not be a bad thing altogether.”

It expects investment growth to remain at double digit next year at around 10.5 percent.

“Contribution from investments to overall GDP (gross domestic product) growth is still set to average about 2.8 percentage in 2017, enough to maintain overall GDP growth above the six percent mark,” it added.

In the third quarter this year, domestic output posted further hike after registering at 7.1 percent, the highest for the region for the period so far.