Philippines likely to grow 6.7 pct in 2016 and 6.4 pct in 2017, says DBS

Philippines economy is expected to grow 6.7 percent this year, while expanding 6.4 percent in 2017. As far as cycles are concerned, the pace of investment growth will play a role in supporting the consumption story in the nearer-term.

Philippines’ 3Q16 GDP growth came in at 7.1 percent, beating market expectations. The economy has now chalked 7.0 percent growth in the year up to 3Q. Private consumption growth has now come in above 7 percent for 3 straight quarters. Given that private consumption makes up about 70 percent of overall GDP, it is hardly surprising to see robust GDP growth being sustained in the quarter.

Further, investment growth will play a role in supporting the consumption story in the nearer-term. Investment growth has now averaged 25 percent over the past year, an unprecedented feat. While it has eased to 23.5 percent y/y in 3Q, it is still outright strong. The government’s infrastructure overhaul will continue to drive construction sector, growth of which has actually gained pace to 15.5 percent in 3Q, up from 11.8 percent previously, DBS reported.

Meanwhile, there have been no material de-stocking activities since 2Q13. De-stocking looks imminent and once it happens, investment growth should moderate more markedly, which may not be a bad thing altogether from a long-term sustainability point of view.