MANILA, Philippines – Ratings company Standard and Poor's (S&P) upgraded its full-year growth forecast for the Philippines on the back of rebuilding efforts in areas affected by typhoon "Yolanda" last year.
S&P now expects the country's economy to expand 6.6 percent this year, slightly up from its forecast last December of 6.4 percent.
The ratings agency’s forecast is within the government's target, but still slower than last year's growth of 7.2 percent.
"In the Philippines, growth could normalize from its rapid pace in 2013, although post-disaster rebuilding efforts could provide an offset in the short-term," S&P said in its report.
Typhoon Yolanda devastated the Visayas region in November and caused more than 6,000 deaths. More than P36 billion worth of infrastructure and agriculture was damaged.
S&P cited several risks facing the country this year, including slowing growth in China, which is the second biggest buyer of our local exports.
S&P was the second of the big three ratings companies that upgraded the Philippines from junk to investment grade status last year.
S&P rates the country with a 'BBB-' with a stable outlook.
The International Monetary Fund (IMF), meanwhile, said the Philippine economy is expected to grow 6.5 percent this year, faster than its earlier estimate of 6.3 percent.
The upgrade was also driven by spending related to Yolanda reconstruction efforts.
"While this envisaged growth path is faster than what was achieved during the previous decades, realizing the Philippines' full potential for rapid, sustained and inclusive growth calls for further reducing bottlenecks to investment and formal sector employment that may be discouraging broader-based business activities," said Rachel van Elkan, IMF's mission chief to the Philippines.
"The challenge therefore is to continue implementing policies that deliver high quality, sustainable growth," she added.
Van Elkan also said monetary policymakers need to watch out for potential risks as advanced economies start tightening monetary policy.
"Further reforms are needed to create a more enabling business environment and to generate additional employment," she said.
"Successfully executing PPPs (public-private partnership projects) and public capital spending projects would relieve infrastructure bottlenecks and help catalyze private investment," she added.
The IMF, concluding a regular consultation with the country's economic managers, also slightly lowered its 2015 GDP forecast to 6.5 percent from a 6.6 percent estimate in January.
It said in a statement the need for accommodative policies in the country had waned with the stronger global outlook.
The IMF also said it expects average inflation this year to be slower at 4 percent against its projection of 4.4 percent in January.
The latest forecast is higher than actual 3.0 percent inflation in 2013, though it is at the midpoint of the 3 to 5 percent government target this year. -- With Reuters