MANILA— Credit Suisse upgraded its 2017 growth forecast for the Philippines to 6.1 percent from six percent after the better-than-expected growth in the second quarter of the year.
This growth forecast is still lower than the government’s 6.5-7.5 percent growth target for the year.
The Philippine Statistics Authority (PSA) earlier reported a 6.5 percent output, as measured by gross domestic product (GDP), from April to June this year, slightly faster than the 6.4 percent in the previous quarter. It is, however, lower than year-ago growth of 7.1 percent.
In a research note, the global financial services company said the second quarter output of the Philippines was higher than the company’s 5.8 percent forecast for the quarter.
Growth in the said quarter was driven by manufacturing, trade, real estate, renting and business activities.
Industry posted the highest growth among the major economic sectors after it expanded by 7.1 percent followed by agriculture at 6.3 percent, and services at 6.1 percent.
The research note cited the strong rise of exports of goods, which grew 23 percent for the quarter compared with the 22.8 percent in the previous three months, as a factor in its upward revision in its GDP forecast.
It explained that this growth “contrasts with the moderation in monthly exports that we have seen.”
PSA data show that total exports showed a downward path from April to June this year with a year-on-year growth of 19.1 percent, 14 percent, and 0.8 percent during the three-month period.
“This divergence could be driven by a decline in export prices, with export volumes holding up much better,” the Credit Suisse report said.
It, however, sees overall slower growth in the second half of the year compared with the first six months based on “our view that private consumption will begin to weaken due to an unusually weak labor market.”
“Our detailed analysis shows that employment growth feeds into consumption with a three-quarter lag. As such, the negative impact of a weaker labor market will likely be felt keenly over the rest of this year,” it said.
Exports growth is also seen to decelerate in the second half of the year on expected weaker demand from China after a strong demand in the first half of the year, weaker demand from other major economies, and commodity price base effects.