New Country Reports market report from Business Monitor International: "Philippines Business Forecast Report Q4 2013"
Boston, MA -- (SBWIRE) -- 08/29/2013 -- Following a blowout 6.8% performance in 2012, we forecast the Philippine economy to expand by 5.9% in 2013. Leading the way forward, we expect the country's nascent investment boom to power forward on the back of strong domestic fundamentals, but note that external headwinds continue to pose a risk.
Despite the fact that the Philippines has passed another expansionary budget for 2013, we expect the budget deficit to widen to come in at a manageable 2.2% of GDP in 2013. While spending continues to be limited by administrative difficulties, revenue growth will be supported by the government's increasing tax collection efficacy and the introduction of a wide-ranging sin tax. As we expected, the Philippines has finally achieved an investment grade rating from a major credit ratings agency in view of the country's improved growth outlook and the government's increasingly consolidated fiscal position, and we expect that further upgrades from the remaining agencies are likely in the cards.
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Major Forecast Changes
We believe that strong domestic fund amentals will be enough to send the Philippines on to above-trend growth over the immediate future. As such, we note that that risks to our 2013 real GDP growth forecast of 5.9% are to the upside, and have upgraded our 2014 and 2015 forecasts to 5.5% and 5.4%, respectively.
With headline inflation trending below its target range of 3.0-5.0%, Bangko Sentral ng Pilipinas should remain comfortable with its monetary policy settings over the near term, likely allowing for its benchmark interest rate to stay pegged at its all-time low of 3.50% through the end of 2013. While we have downgraded our end 2013 headline inflation forecast to 3.4% from 4.0% previously, we note that inflationary pressures should begin to creep up over the medium term in line with rising money supply growth, and we continue to expect some form of tightening in 2014.
Key Risks To Outlook
Risks to our end of period 2013 peso forecast of PHP41.55/US$ have shifted to the downside, as hot money outflows have effected a substantial sell-off in the currency. While we are not yet convinced that the currency will remain weak over the rest of the year, we note that continued EM equity weakness could keep the peso depressed.
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