MANILA — BMI Research, Fitch Group’s think tank unit, has raised its outlook for the Philippine economy for this year following the “stellar economic growth performance” in the first quarter of 2018.
In a report released Thursday, BMI Research revised upward its gross domestic product (GDP) forecast for the country to 6.5 percent from its previous projection of 6.3 percent.
BMI Research attributed its more optimistic outlook for 2018 to government consumption and fixed capital formation.
“Both components were driven by President Rodrigo Duterte’s expansionary fiscal policy and are likely to continue to provide support to headline GDP, allowing for growth above 6 percent over the coming quarters,” the Fitch Group unit said.
Data from the Department of Budget and Management showed that infrastructure and capital outlays rose 33.7 percent in Q1 2018 amounting to PHP151.7 billion compared to the same period a year ago.
“Given that the Philippine government has embarked on fiscal reforms to boost revenue and deleverage considerably since the early 2000s, this should allow the Duterte administration to continue to keep up its strong spending in the near term,” it noted.
BMI Research added that the Philippines’ demographics will act as “tailwind”, supporting the development of labor-intensive economic activities such as business process outsourcing (BPO) and manufacturing.
It also forecast that working age population in the country will grow by an average of 1.9 percent over the next few years, with the current population having over 51 percent at age under 25.
“This will provide necessary labor force that is required for the BPO and manufacturing industries, which employ around 5 million people in the country,” the report read.
“However, we are sticking to our view that economic growth is likely to moderate over the coming quarters.
Even as the Philippines continues to enjoy positive demographics, the economy is showing signs of overheating, and we expect the deterioration in the business environment to weigh on private investment,” it added.
It also mentioned that the “abrupt and drastic measures” taken by the administration have stifled confidence of investors and disrupted businesses, citing the closure of Boracay on few weeks’ notice as well as threatening of banning all open pit mining.