The Philippine economy is poised to grow by 6 percent annually over the next five years, below the government’s target of 7 percent to 8 percent, DBS Bank of Singapore said Monday.
“The government seems a little overly optimistic to target GDP growth back at 7 percent in the near-term. At this juncture, we reckon that average GDP growth for the next 3 to 5 years may be circa 6 percent instead,” the bank said.
“How effective the next government in continuing Aquino’s infrastructure overhaul will be the key factor that could propel the economy stronger beyond 2016,” it said.
DBS said growth in public construction moderated to 4.3-percent year-on-year in the first half, after recording a stellar 9.1 percent last year.
“Ahead of next year’s elections, there are concerns that the pace of project completion may slow down. While this remains to be seen, it is therefore important to see the robust growth in private sector being sustained into next year,” it said.
DBS said GDP growth likely improved to 6.2 percent in the third quarter. It said while some base effects might have played a part, GDP growth momentum remained pretty strong going into 2016.
It said export growth was disappointing in the third quarter, but the main support for the economy would still come from the domestic front.
Bank of America Merrill Lynch, for its part, said government spending grew 19 percent in the third quarter and was poised to accelerate further. It said the proposed 2016 budget implied strong growth and might resume as a GDP growth driver going forward.
“The main reason for the slower spending pace may be that the government implemented reforms, particularly in the area of procurement. The government stresses the need for transparency, competitiveness and accountability when undertaking public works projects or contracting services,” it said.
“[The] 19 percent spending growth in the third quarter of 2015 signals an acceleration,” the bank said.
GDP grew 5 percent in the first quarter, dragged down by the government’s anemic fiscal expenditures. Second-quarter GDP grew 5.6 percent, bringing the first-half average to 5.3 percent.
Moody’s Analytics, a division of Moody’s Corp., said over the weekend that despite the rosy outlook in the third quarter, exports remained a “weak point” due to weakened global demand, especially from China.
The world’s second-largest economy is an important trading partner of the Philippines.
Earlier report from the government said that exports fell 24.7 percent in September as sluggish global demand and depressed prices weakened the shipments of all key commodities.
Last year, the economy grew by 6.1 percent, slower than the 7.2 percent in 2013, but was still considered one of the fastest in Asia.