Global credit watchdog Standard & Poor’s Rating Services raised the 2016 growth forecast for the Philippines to 6.1 percent from an earlier estimate of 6 percent, despite the financial turmoil brought about by the United Kingdom’s vote to exit the European Union and the slowdown in China’s economy.
S&P said in a regional report the Philippines would continue to outperform its peers in Southeast Asia.
“The Philippines continues to be the outperformer with its growing middle class and business process outsourcing boom,” S&P said.
The 2016 growth forecast for the Philippines was higher than Indonesia’s 5.1 percent, Malaysia’s 4.5 percent, Singapore’s 1.8 percent and Thailand’s 3.2 percent.
S&P also projected that the Philippine economy would grow 6.3 percent in 2017, faster than Indonesia’s 5.3 percent, Malaysia’s 4.7 percent, Singapore’s 1.9 percent and Thailand’s 3.2 percent.
It said the first wave of volatility following the Brexit vote was digested smoothly and overall, “markets calmed after only a few days.”
S&P said that growth in Southeast Asian economies appeared to have bottomed out as calmer financial markets brought about more confidence and capital inflows.
“We do not see the fallout from the recent Brexit vote as anything more than a downside risk for Asia-Pacific at this juncture. This surprise decision by UK voters to leave the European Union has led to considerable global financial market turbulence, which subsided relatively quickly,” S&P said.
S&P did not discount the possibility of revisiting its baseline assumptions for the economies in the region “should the turbulence re-emerge, or should the political fallout broaden to other economies to the point of affecting spending decisions.”
British banking giant Hongkong and Shanghai Banking Corp. also raised its 2016 growth forecast for the Philippines to 6.3 percent from 5.9 percent and its 2017 growth outlook to 6.3 percent from 5.8 percent, taking into account the expected impact of the planned increase in fiscal spending of the Duterte administration.
The bank said in a report that an increase in the longer-term growth outlook was always predicated on sustained infrastructure spending.
“The short-term impact on investment and employment leads us to upgrade our 2016 and 2017 GDP forecasts to 6.3 percent for both years, from 5.9 percent and 5.8 percent previously, assuming the [budget deficit] target is reached,” it said.
Incoming Budget Secretary Benjamin Diokno earlier said that the new government would target a 2015 budget deficit representing 3 percent of gross domestic product.
HSBC said the 3-percent deficit-to-GDP ratio would be reached by a further increase in infrastructure spending and tackling underspending.