Global debt watcher Fitch Ratings expects the Philippine economy to grow 6.7 percent annually in 2019 and 2020, making it one of the fastest growing in the Asia-Pacific region.
Fitch managing director and chief operating officer Tony Stringer who took part in the recent Philippine economic briefing said the country would sustain its strong growth despite the higher inflation environment.
Latest data from the Philippine Statistics Authority on Tuesday showed that inflation was unchanged at 6.7 percent in October from the September figure.
Stringer said the spike in inflation might prove to be temporary. “Headline inflation increased to 4.3 percent year-on-year in the first half of 2018 from 2.9 percent in 2017, and we expect consumer
price inflation to average around 4.4 percent percent in 2018, above the BSP’s official band of 2 percent to 4 percent, due in large part to higher commodity prices and a recent increase in excise taxes associated with the tax reform package passed at the end of last year,” said Stringer.
“However, the one-off impact of the tax hikes is likely to dissipate in 2019, and therefore we expect average inflation to fall to around 3.8 percent in 2019. We think the BSP’s cumulative rate hikes of 150 basis points so far this year should help to keep further inflationary pressures from building up,” he said.
The latest preliminary assessment conducted by the Asean+3 Macroeconomic Research Office following its visit on Oct. 15 to 24 showed the Philippines would likely sustain its robust growth in 2018 and 2019 on strong government spending and investment,. The economic output projected to expand 6.5 percent in 2018 and 6.4 percent in 2019.
Stringer said the Philippines remained one of the fastest-growing economies in the Asia Pacific region. “Strong domestic demand will remain a driver of growth in the Philippines, supported by rising expenditure under the Philippine government’s public investment program and private consumption spending which remains supported by remittances,” Stringer said.
He warned that while macroeconomic performance generally remained strong, the economy faced some overheating risks in the near term.
The Bangko Sentral ng Pilipinas’ hiking of policy rates by a cumulative 150 bps so far in 2018 should help to keep the pressures under control.
“While foreign direct investment data suggests that foreign investor sentiment has been holding up reasonably well in recent months, a relatively weak business environment could pose a risk to
attracting higher levels of FDI,” Stringer said.
President Rodrigo Duterte recently signed Executive Order No. 65 promulgating the 11th regular Foreign Investment Negative List that would allow 100-percent foreign investment participation in five areas: internet businesses; teaching at higher education levels; training centers engaged in short-term high-level skills development; insurance adjustment companies, lending companies, financing companies and investment houses; and wellness centers.