MANILA, Philippines - The Hong Kong and Shanghai Banking Corp. has hiked its 2013 gross domestic product (GDP) forecast for the Philippines to 5.9% from 4.9%.
The upgrade is meant to "reflect stronger growth in Japan, improved economic indicators from the US as well as unusually accommodative monetary policy both abroad and at home," Trinh D. Nguyen, economist at the HSBC, said in a research note on Friday.
Despite the bank's latest move, the latest forecast is still below the government's target of a 6% to 7% expansion in the economy this year, and slower than the 6.6% growth recorded last year.
"Consistently positive political and macro news flow supports the case for the Philippines. The Aquino administration has gained public trust according to opinion polls for his fiscal consolidation and anti-corruption efforts — refreshing for a nation with a history of colorful leaders," Nguyen pointed out.
Moreover, she noted the Bangko Sentral ng Pilipinas has kept inflation manageable and within target since the end of 2009, providing space to support growth when needed.
"As such, both sensible fiscal and monetary policy will likely help the Philippines attain an investment grade rating in 2H2013 (second half of 2013)," Nguyen said.
However, the economist stressed there is still "a lot of work" to be done as the country lacks infrastructure and a better business environment to entice more investments.
"But on the whole, the Philippines has gradually broken away from its tumultuous past. The nation is now looks on its way up with plenty of opportunities to look forward to," Nguyen said.
"What’s more noteworthy to watch is the replacement of President Aquino in 2016, which would signal whether the reform momentum in the Philippines will be sustained. While a foundation is laid, reforms to long-standing challenges are still required," she continued.