MANILA - - An economist of Melbourne-based financial institution ANZ forecasts sustained rise of the Philippine economy this 2017 to 6.9 percent following the within-target output in 2016.
The government on Thursday reported the slight moderation of domestic growth in the last quarter of 2016 to 6.6 percent from quarter-ago's seven percent due partly to decline in farm output.
However, investments and household spending remained robust, enabling the economy to grow, as measured by gross domestic product (GDP), by 6.8 percent, almost at the upper end of the government's six to seven percent target for 2016.
ANZ economist Eugenia Victorino, in a research note issued Thursday, said she expected domestic expansion this year to be supported by increased government expenditures, particularly on infrastructure.
She, however, noted that continued increase on infrastructure investments would further boost imports, which, on the other hand, would, further lessen the country's current account surplus.
"In our view, the current account could further deteriorate on increased risks of the goods trade deficit balancing out against remittance inflows," she said.
The current account has been in surplus for more than a decade now due to strong dollar inflows from Overseas Filipino Workers (OFWs) and revenues of the Business Process Outsourcing (BPO) sector.
However, the surplus has been declining as the country imports more to address the rising need of the growing economy.
"The outlook on the current account will now depend on the growth in services trade," the research note said, citing that services trade have been registering surpluses of around one to 1.5 percent of GDP in recent years.
With the government's plan to further strengthen infrastructure investments, ANZ expects an uptick on inflation outlook, thus, its forecast of an upward adjustment in the Bangko Sentral ng Pilipinas' (BSP) key rates starting in the third quarter of this year.
"We still believe that the Bangko Sentral ng Pilipinas (BSP) will be one of the first Asian central banks to tighten policy," it added.
To date, the central bank's overnight borrowing or reverse repurchase (RRP) rate is three percent, the overnight lending or repurchase (RP) rate is 3.5 percent, and the special deposit account (SDA) rate is 2.5 percent. (PNA)
Source: Philippines News Agency