HSBC on PH: 5.9% growth, investment grade in 2013

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HSBC calls the Philippines 'one of greatest comeback stories" in 2012 and says investment grade rating is coming in second quarter

MANILA, Philippines – Global giant Hong Kong and Shanghai Banking Corp (HSBC) upgraded its growth outlook for the Philippines to 5.9% from 4.9%, and joined the chorus of expectations that an investment grade rating for the country is likely coming in the second quarter.

In a research note on Friday, February 22, HSBC cited “improved external outlook, supportive monetary policy, and increased fiscal spending” as reasons for its gross domestic product growth outlook.

It called the Philippines “one of the greatest comeback stories in the past year” for transforming from being “the ‘sick man of Asia’ to a symbol of what gradual and steady reform can achieve.”

This GDP forecast is lower than the 6% to 7% official target of the government for 2013. The Philippines grew 6.6% in 2012 from 3.9% the previous year.

HSBC, however, noted that international credit rating agencies will soon include the Philippines among A-lister companies with an investment grade. The country is now one notch below it.

“The sovereign will likely be rewarded with an investment grade in the second half for its prudent management of the economy,” it said.

It noted that the the resulting “cheaper and more stable sources of funding for the government” will be crucial since “a lot of work is still required.”

While “remittances shielded the Philippines from sluggish external demand” and that “timely fiscal and monetary policy bolstered government and private consumption,” challenges still remain, including “weak infrastructure.”

“Lacklustre infrastructure and business environment hinder investment and productivity. Stagnant FDI (foreign direct investment) inflows reflect challenges such as high costs of electricity, poor infrastructure, and restrictive ownership laws,” it said.

“We remain watchful of further reforms to transform the economy,” it added. –

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