MANILA, Philippines - Singapore-based DBS Bank raised its growth projection for the Philippines to 5.6% from 5.3%, on the back of strong government and consumer spending.
In its report, DBS said the Philippines is in a good position to handle a global economic slowdown, with room for further monetary and fiscal stimulus, if needed.
However, DBS lowered its GDP growth forecast for the Philippines next year to 5%, due to expected slower global demand.
"The Philippine economy has been a clear outperformer thus far this year, registering high growth rates and low levels of inflation," DBS said. In the first half, the Philippines grew by 6.1%.
"Domestic demand continued to perform well, driven by increased consumer and government consumption. On the external front, overall demand has been holding up despite significant headwinds... In particular, services exports maintained a steady growth rate through the first half of the year. Meanwhile, manufacturing output eased after a sharp spike in the first quarter," DBS said.
The manufacturing sector contracted by 2.9% in the second quarter.
"Final demand has clearly been weak and it is not surprising that manufacturing output slumped after the restocking process is completed. Looking at the trade numbers, it is readily apparent that the value of electronics exports has been going sideways since April," the bank said.
DBS noted overall export numbers have held up well, after an increase in non-electronics manufacturing for April and May.
"With regional PMI numbers showing that economic activity is slowing, a revival in merchandise export demand is unlikely in the near term. For July, an export reading of -3.5 percent year on year is expected," DBS said.