Swiss bank UBS hikes 2013 PHL economic forecast to 7%

Global investment banking giant UBS upgraded anew its economic forecast for the Philippines this year, citing benign inflation and sound monetary policies that signify sustained growth. 

 

“We revise our 2013 real GDP (gross domestic product) growth forecast higher to 7.0 percent from 6.3 percent,” Edward Teather, ASEAN economist at UBS in Singapore, wrote in a June 11 research note. 

 

In May, UBS raised its Philippine GDP to 6.3 percent from 4.5 percent. 

 

The latest expectation falls at the upper-end of government's 6 to 7 percent growth goal for the year and is faster than the revised 6.8 percent GDP recorded in 2012. 

 

UBS has joined the ranks of Metropolitan Bank & Trust Co. and British banking behemoth Barclays in raising their growth forecasts after the government reported the economy grew 7.8 percent in the first quarter, the fastest in Asia. 

 

Teather noted “benign inflation, a current account surplus, a bullish government and a dovish central bank suggests Philippine policy settings are among the most likely in ASEAN-5 to provide insurance against downside risks to growth.”

 

In May, inflation settled at 2.6 percent, unchanged from a month earlier. The May figure pulled inflation for the first five months of the year to 3 percent—at the lower end of Bangko Sentral ng Pilipinas' 3 to 5 percent target. 

 

Benign inflation has paved the way for monetary authorities to keep policy rates—a benchmark for bank loans—at record lows of 3.5 percent for overnight borrowing and 5.5 percent for overnight lending since October. 

 

This has allowed corporations and individuals to borrow and spend for less, helping the economy expand.

 

For 2014, UBS has also upgraded its Philippine economic forecast to 6 percent from 5.5 percent.

 

The slowdown can stem from “slower government spending post elections and because we do not think the pace of expansion in construction—which we link to low interest rates—will be sustained,” Teather wrote. — VS, GMA News