DBS hikes PHL growth outlook for 2013

Singaporean banking giant DBS Bank Ltd. has raised its forecast for the Philippines' economic growth on the back of low interest rates fueling investment and consumption in the medium term. "Positive momentum is expected to spill over into 2013 and we have revised up our GDP (gross domestic product) growth forecast from 5.3 percent to 6.0 percent," DBS said in a section of a research note released Wednesday. "Notably, conditions remain very conducive for economic growth," it read further. According to DBS, stable inflation, which settled at 3.0 percent or the lower end of the central bank's 3 to 5 percent target in January, will make monetary authorities keep policy rates on hold. DBS forecasts inflation to settle at 3.1 percent this year, slightly higher than the central bank's 3.0 percent projection. The Singaporean bank expects policy rates unchanged until the third quarter, but it expects a 25 basis points hike in the following quarter. Policy rates remain at record lows of 3.5 percent for overnight borrowing and 5.5 percent for overnight lending. "This [low interest rates] will facilitate investment, including the [public-private partnership] projects, and consumption growth over the medium term," the research note read. Last Thursday, the government reported that the country's GDP hit 6.6 percent in 2012, beating market expectations and besting other Asian economies. DBS said the better-than-expected GDP growth was due to non-electronics manufacturing offsetting the slump in electronics. "Although, manufacturing output numbers under performed the broader economy, things are nowhere as bad as in 2009," the research note read. DBS, likewise, said services sector "held up very well." An uptick in the construction sector also helped keep the economy robust. "[A] construction revival is currently underway and growth in this sector hit 19.5 percent" year-on-year in the second half of 2012,  the research note read.   In revising its outlook, DBS joined the ranks of a number of lending agencies and international financial institutions that hiked their respective growth forecasts for the Philippines. — BM, GMA News