HSBC raises PHL GDP outlook, sees investment grade rating in 2H

Hongkong and Shanghai Banking Corporation Limited has raised the outlook for Philippine gross domestic product (GDP) in 2013, as it sees the country snagging an investment grade rating in the second half, the global financial services giant reported on Friday. 

 

“Improved external outlook, supportive monetary policy, and increased fiscal spending will likely bolster Philippine output,” Trinh Nguyen, Hong Kong-based economist at HSBC, noted in a report entitled “Philippine Economics: In a sweet spot.”

 

“We upgrade our forecast to 5.9 percent from 4.9 percent in 2013,” following the stronger-than-expected 6.6 percent GDP in 2012, said Nguyen. 

 

The projection, however, is below the growth target of 6 to 7 percent being eyed by the Aquino administration. 

 

HSBC has joined the ranks of global financial firms DBS Bank Ltd. of Singapore and London-based Barclays in raising the country's growth forecast.

 

HSBC sees the Philippines getting the coveted investment grade rating in the second half. 

 

“Sensible fiscal and monetary policy will likely help the Philippines attain an investment grade rating in 2H2013 (second half of 2013),” said Nguyen. 

 

She noted the ability of Bangko Sentral ng Pilipinas to keep commodity prices in check and within the 3 to 5 percent target that offers a comfortable space for growth-accommodating policy. 

 

“Timely fiscal and monetary policy also bolstered government and private consumption,” the report read, noting that consumption has fueled the domestic economy and shielded the Philippines from “sluggish external demand.”

 

Debt-watchers Standard and Poor's and Fitch Ratings have given the Philippines a BB+ rating or one notch below investment grade with a positive outlook. 

 

While keeping the Philippine rating at Ba1 or one notch below investment grade, Moody's Investors Service has said fundamentals place the country well within the Ba1 to Baa2 ratings range, that translate to two notches above investment grade. 

 

An upgrade is seen attracting more investors and strengthening of Philippine industries. 

 

But HSBC warned that weak infrastructure and poor business environment is a  major hurdle in sustaining growth. 

 

“While the country is endowed with natural resources, a skilled labor force, favorable demographics and a dynamic domestic market to counter the global slump, a still lackluster infrastructure and business environment hinder investment and productivity,” said Nguyen. 

 

She noted that “attaining cheaper and more stable sources of funding would allow the government to roll out broader reform agendas.” 

 

Lower cost of funding is a result of an investment grade rating.

 

“But on the whole, the Philippines has gradually broken away from its tumultuous past. The nation now looks on its way up with plenty of opportunities to look forward to,” Nguyen said.  — VS, GMA News