* Real GDP growth in the Philippines accelerated from 6.0% y-o-y in Q315 to 6.3% in Q415, as the booming construction sector continued to power the economy forward. Domestic resilience should persist, informing our expectations for the Philippine economy to remain on a sound footing despite ongoing external challenges. Accordingly, we are forecasting real GDP growth to come in at 6.0% and 5.9% in 2016 and 2017, respectively.
* We retain our expectations for the Bangko Sentral Pilipinas (BSP) to keep its benchmark interest rate on hold at 4.00% throughout 2016, as the balance between modest inflation and strong growth remains ideal. Risks to this forecast are roughly in balance, including a prolonged and worse than expected El Nino (which could potentially lead to rate hikes to curb inflationary pressures) and a stagnation in growth as a result of political risk, which could lead the central bank to cut.
* The Philippines' May presidential elections will be a test of the country's improved political risk framework that was put into place by the outgoing Aquino administration. While Mar Roxas and Grace Poe pose little threat to the policy continuity outlook, the same cannot be said for Rodrigo Duterte and Jejomar Binay. We believe that Poe and Roxas would largely carry on the economic reform work championed by Aquino while also running relatively clean governments, while Duterte would focus much more on cracking down on crime and corruption. The long list of corruption allegations against Binay could result in legal questions surrounding his presidency, should he be elected.
Major Forecast Changes
*We have revised our end-2016 forecast on the Philippine peso stronger to PHP47.00/USD, versus PHP48.20 previously, following a prolonge period of US dollar weakness.
Key Risks To Outlook
*The Philippines remains at risk of substantial hot money outflows in the event of acute global credit or financial market stresses.
*Growth slowdowns in both China and Japan, to which the Philippines is heavily exposed in both investment and trade terms, could undermine the country's strong domestic growth story.
*The potential for a further devaluation in the Chinese yuan by the People's Bank of China (PBOC) so as to support China's economy could weigh on the Philippine peso. A weaker yuan could see the BSP allow for a further weakening of the peso in order to maintain the competitiveness of Philippine exports relative to Chinese exports.
|Nominal GDP, USDbn||285.8||300.3||312.6||345.1|
|Real GDP growth, % y-o-y||6.1||5.8||6.0||5.9|
|Consumer price inflation, % y-o-y, eop||2.7||1.5||2.5||4.0|
|Exchange rate PHP/USD, eop||44.72||46.91||47.00||46.00|
|Budget balance, % of GDP||-0.6||-0.4||-0.3||0.1|
|Current account balance, % of GDP||3.8||2.8||3.5||3.5|
Assess your risk exposure in Philippines with our 100% independent forecasts assessing the pace and stability of this key market. Backed by trusted data from BMI Research's 52 million data point economic forecast model, this report will allow you to measure political, economic, business environment and operational risks in Philippines with confidence.
Your subscription service includes:
- Delivery of the report in print and PDF
- Online access for 12 months
- The functionality to translate your online report into your choice of 10 languages - Arabic, Chinese, French, German, Italian, Japanese, Korean, Portuguese, Russian and Spanish
- The ability to export data and graphs from the online report directly into your workflow
- The support of a dedicated Account Manager to answer any questions you might have about your subscription
- Access to our team of leading analysts who will be happy to answer any questions you might have about the data and forecasts included in this report