ING Bank Manila said fiscal and monetary stimuli are needed to make the Philippine economy reach the low end of the growth target range of 6.5 percent to 7.5 percent next year.
“A double-headed dose of stimulus (fiscal and monetary) could easily be the antidote to sluggish growth to catapult GDP to 6.5 percent in 2020 even in the face of a projected global economic slowdown,” ING Bank Manila senior economist Nicholas Mapa said in a report Friday.
Mapa’s comment came a day after the Bangko Sentral ng Pilipinas at its last meeting for the year kept its benchmark interest rates steady at 4 percent amid the benign inflation environment.
“The slowdown in 2019 growth has been pinned on the government budget delay and global headwinds stemming from the US-China trade war. However, we also note a substantial pullback in overall investment activity in 2019, with second quarter and third quarter capital formation contracting by 8.5 percent and 2.1 percent, respectively,” he said.
He said with public construction negative in the first half of 2019 (owing to the budget delay), overall construction activity slowed to only a single-digit growth in first quarter and second quarter (6.4 percent and 2.8 percent).
“With BSP easing by 75 bps in 2019 and possibly more on the way, we expect capital formation and investment activity to get a shot in the arm to help solidify the Philippine growth story,” Mapa said.
On Thursday, the Monetary Board, the policy-making body of Bangko Sentral ng Pilipinas, kept the benchmark interest rate at 4 percent, taking into account the continuing benign inflation environment.
BSP Governor Benjamin Diokno, who is also the board chairman, said in a briefing the interest rates on the overnight deposit and lending facilities were kept unchanged at 3.5 percent and 4.5 percent, respectively.
“The Monetary Board’s decision is based on its assessment of a benign inflation environment. Latest baseline forecasts indicate that the future inflation path remains within the target range of 3.0 ± 1.0 percentage point [2 to 4 percent] in 2020-2021, with well-anchored inflation expectations,” Diokno said.