The Philippine economy is expected to rebound with a 6.4-percent growth in 2019, faster than 6.2 percent in 2018, on the back of major infrastructure projects, the research unit of the Association of Southeast Asian Nations Plus Three said in a report.
The Asean+3 Macroeconomic Research Office said in the 2018 Annual Consultation Report on the Philippines that the government’s ‘Build, Build, Build’ infrastructure program would support economic expansion this year.
It said economic growth slowed down to 6.2 percent in 2018 amid weaker external demand and private consumption. “The economy is projected to recover to grow by 6.4 percent in 2019. The government’s ‘Build, Build, Build’ infrastructure program will continue to provide impetus to the economy,” Amro said.
It said private consumption was expected to recover as inflation pressure eased and consumer confidence was restored. Exports, however, would remain tepid, the think tank said.
Headline inflation is expected to continue its downward trend that started in late 2018 into the 2-percent to 4-percent target range in 2019, on lower oil prices and continuing rollout of government measures to dampen inflationary pressures, such as the passage of the rice tariffication bill.
“The Philippine external position has weakened due to a wider current account deficit and larger non-foreign direct investment capital outflows. As a result, international reserves declined, but have remained more than adequate in terms of imports coverage and short-term external debt repayment capacity,” Amro said.
It said that because of the high demand for imports of capital goods and raw materials for infrastructure investment projects, the current account would remain in deficit this year.
“Non-FDI outflows are expected to ease following the sharp price corrections in domestic assets, and as repayments of foreign debt by domestic residents would have run its course. However, FDI inflows are also likely to moderate on the back of fewer approvals of new projects and higher cross border borrowing costs,” it said.
Amro said among the major risks facing the Philippine economy were mostly short-term such as the escalating global trade tensions and a sharp tightening of global financial conditions.
“Domestically, higher-than-expected inflation and pockets of financial vulnerabilities are the key concerns. While domestic risks have started showing signs of easing, external risks have remained heightened. Policymakers need to remain vigilant on the development of short-term risks and get ready to recalibrate their policy mix to sustain macroeconomic stability,” it said.
It said monetary policy should be kept appropriately tight to anchor inflation expectations and curb second-round effects. It said the BSP’s vigilance and commitment to safeguard price stability and financial stability was commendable.
The 6.2-percent expansion last year missed the government’s target range of 6.5 percent to 6.9 percent. Economists blamed higher inflation rate and anemic agricultural output for the sluggish economic performance in 2018.