MANILA - Singapore-based DBS retained its 2015 growth forecast for the Philippines at six percent amid the sharp 17.4-percent decline in merchandise exports last May.
“Overall GDP growth may still come in around six percent this year,” DBS said.
“While a moderation in export growth is widely anticipated this year, the May figure still came as a huge disappointment,” DBS said.
It said export growth could be barely in the positive this year after expanding by an average of 8.7 percent over the last three years.
“High base effects certainly played a part, but the current state of global demand also means it is getting harder to sustain high export growth year after year,” the investment bank said.
The country’s merchandise exports fell the most in three years after contracting by 17.4 percent to $4.9 billion in May from $5.9 billion in the same month last year amid the global economic slowdown.
This translated to a five-percent decline in merchandise exports to $24.77 billion in the first five months of the year from $23.54 billion in the same period last year.
DBS pointed out sustained strength in the overall manufacturing sector would help ease some burden off from services and construction sectors.
“More importantly, note that contribution from net exports to overall GDP growth has been fairly small in recent years Private consumption and investment growth have been pretty much the drivers of the 6.6-percent average growth in 2012-14,” it said.
Last May, DBS slashed the country’s GDP growth forecast to six percent instead of 6.3 percent after the lower-than-expected economic expansion in the first quarter of the year.
The country’s GDP growth slowed down to 5.2 percent in the first quarter of the year from 5.6 percent in the same quarter last year amid weak government spending.
The government expects the economy to grow between seven-and eight-percent this year.
The Singapore-based investment bank sees the country’s inflation falling within the two-to four-percent target set by the Bangko Sentral ng Pilipinas (BSP).
Inflation eased to a 20-year low of 1.2 percent in June from 1.6 percent in May.
DBS said the BSP’s Monetary Board would likely keep key policy rates steady over the near term.
“No monetary policy response is likely in the near-term. It is interesting to see, however, if the central bank will spend more time discussing the relative strength of the peso,” the bank said.
The overnight borrowing rate is currently pegged at four percent while the overnight lending rate is at six percent.
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