British banking giant HSBC sees the Philippines standing out as one of Asia’s top performers, with gross domestic product (GDP) growth this year seen to remain robust at 6.5 percent.

Although slower than the nine-month average of 7 percent in 2016, HSBC’s growth forecast for the Philippines this year is higher than the market consensus of 6.3 percent and also better than the forecasts for other markets in the region.

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The average GDP growth for Asia, excluding Japan, was projected at 5.8 percent for 2017. The forecast growth for the Philippines is the same as HSBC’s growth projection for China.

Also, HSBC expects the inflation rate in the Philippines to rise to an average of 3.6 percent this year from 1.8 percent last year. This is still within the inflation-targeting central bank’s goal of 2-4 percent.

“The economic outlook for the Philippines is robust, underpinned by resilient domestic demand. A number of reforms, including the tax reforms and other constitutional reforms, will likely be undertaken in 2017,” said the HSBC research note by economist Joseph Incalcaterra.

HSBC said investment growth would likely remain robust as the government was targeting a 3-percent deficit in the 2017 budget, with infrastructure investment upwards of 5 percent of GDP, eventually reaching 7 percent by the end of the Duterte administration. The economist said this would significantly boost the contribution of investment to the economy’s growth.

“Fortunately, fiscal consolidation in recent years allowed the government to pursue fiscal expansion, and low debt levels suggest it is sustainable for now. Moreover, the government is hoping to accelerate PPP (public-private partnership) projects to co-opt more financing from the private sector,” the economist said.

“There are various headwinds on the horizon for the regional economy next year and, while the Philippines is not completely spared, the economy remains relatively insulated,” Incalcaterra said.

For instance, the economist cited fears that investment from the United States—the largest contributor of foreign direct investment (FDI) in the Philippines—might fall under new US economic policies. However, he noted that China’s investment commitments of $24 billion recently could partly offset the potential decline in FDI from the United States.

“In any case, the Philippines will continue to see significant changes in the balance of payments dynamics. We forecast the current account continuing to moderate through 2018, but a pick-up in capital inflows following potential FDI reform could partly offset the weaker current account,” he said.

HSBC expects Philippine GDP growth in the first quarter at 5.9 percent, rising to 6 percent in the second quarter and 7.3 percent in the third quarter. It is, however, seen to ease to 6.8 percent in the fourth quarter.

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On the tax and constitutional reforms espoused by President Duterte, although he remains popular among the people with 80-85 percent rating approval, the economist said this might depend on how the reforms would be implemented.

“On the other hand, the outlook for manufacturing exports does not look too bright outside electronics, which might lead to a continuation of trade deficits in the Philippines. Elsewhere, the Philippines remains highly vulnerable to weather trends. Fortunately, risks stemming from the onset of La Niña after El Niño are relatively contained, thanks to government efforts which are likely to ramp up rice imports in 2017,” he said.

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