The International Monetary Fund will revise upward its growth forecast of 6 percent for the Philippines this year following the solid 7-percent expansion in the second quarter, its representative in Manila said Tuesday.
“The second-quarter GDP outturn in the Philippines was somewhat faster than anticipated in our 6-percent growth forecast for 2016,” IMF resident representative to the Philippines Shanaka Jayanath Peiris said in an e-mailed statement.
“Therefore, we will mostly likely be revising up our growth forecast for the Philippines in the next round of revisions,” Peiris said.
The second-quarter expansion was faster than the revised 6.8 percent a quarter ago. The figure brought the first-half average to 6.9 percent, which is near the upper bound of the Duterte administration’s official target range of 6 percent to 7 percent.
The IMF in July retained its growth forecast for the Philippines this year at 6 percent and 6.2 percent in 2017, but said growth might be higher in the medium term if the country spend more on infrastructure and education and health of its population.
Mission chief Chikahisa Sumi said at the conclusion of the 2016 Article IV Consultations with the Philippines that a higher revenue and productive spending scenario of about 3 percent of GDP with the implementation of the 10-point reform agenda of the Duterte administration would raise the IMF staff’s baseline growth outlook of about 6 to 7 percent to a 7 to 8 percent range over the medium term.
Sumi added increased spending would make the Philippines one of the fastest growing—if not the fastest—economies in the world and help reduce poverty toward the government’s ambitious target.
Sumi said the Philippine economy was doing “very strong” despite the external headwinds coming from the global trade slowdown, volatility in the financial markets and the recent exit of United Kingdom from the European Union.
After the release of the strong second-quarter GDP data, major global financial institutions raised their growth forecasts for the Philippines this year.
Japanese financial firm Nomura raised its GDP growth forecast for the Philippines in 2016 to 6.7 percent from 6.3 percent, saying the revision was supported by the solid first-half growth average of 6.9 percent.
“In our view, these factors should keep GDP growth robust in the second half, averaging 6.5 percent even as the election-related boost to growth in the first half fades,” Nomura said.
Nomura also raised its GDP growth forecast next year to 6.3 percent from 6 percent, saying fiscal support to growth would remain as strong, given the pragmatic and pro-growth stance of the new government.
Credit Suisse upgraded its growth forecast for the Philippines this year to 6.5 percent from its previous estimate of 6.2 percent, despite the expected slowdown in the second half.
Meanwhile, J.P. Morgan said the Philippine economy had the potential to grow by 6.4 percent this year, as fiscal and infrastructure spending would increase as President Rodrigo Duterte planned to accelerate spending that could lift domestic investment.
Earlier, DBS Bank of Singapore said the Philippine economy had the potential to grow higher this year at 6.6 percent than its previous projection of 6.3 percent even if it factored in some moderation in the second half.
Government data showed that private consumption in the second quarter grew a record-high 7.3 percent, government consumption expanded 13.5 percent, while investment growth came in at 27.2 percent.
DBS said the one figure that might continue to grab the headlines was the pace of investment growth in the economy. In the last three quarters, investment growth has averaged 26.5 percent.
The Duterte administration is eyeing a 6 to 7 percent GDP growth this year. The economy expanded by 6.8 percent in the first quarter. Last year, GDP grew 5.8 percent, missing the official target of 6.5 to 7.5 percent but remained one of the fastest in the region.