The local unit of Dutch financial institution ING Bank expects the Philippines’ growth story to continue this year, saying the gross domestic product will likely expand over 6 percent.
“Growth is expected to remain above 6 percent as the economy fires on all cylinders but as the Philippine economy revs up for faster growth we do see a very different 2020 from 2019,” ING Bank Manila senior economist Nicholas Mapa said Monday in a report.
Mapa said economic expansion this year could come from three sectors, namely consumption (robust spending due to low inflation), timely passage of the P4.1-trillion national budget, and investment.
The GDP growth in the first half of 2019 averaged at 5.5 percent, well below the target range of 6 percent to 7 percent, due to the delay in the approval of the P3.7-trillion national budget. President Rodrigo Duterte signed the budget only in April after months of the impasse between the two houses of Congress.
However, economic growth in the third quarter accelerated to 6.2 percent from 5.5 percent a quarter ago as the government increased fiscal spending, especially on big-ticket infrastructure projects. The third-quarter expansion was faster than 6 percent in the same period last year.
It brought economic growth in the first three quarters to 5.8 percent, near the low end of the target range.
Mapa also said the narrowing trade gap of 2019 would not hold as both public (budget passage) and private (Bangko Sentral ng Pilipinas rate cuts) investment outlays would push up the import bill, reminiscent of the 2018 episode.
“This combined with a narrowing interest rate differential on projected BSP rate cuts attract less portfolio flows to Philippine shores, which was one main factor for the peso’s strong performance in 2019. Thus, we expect a very different landscape for 2020 with growth, interest rates, inflation and USD/PHP all seeing nowhere to go but up,” he said.
In a previous report, Mapa said fiscal and monetary stimulus were needed to make the economy reach the low end of the target range of 6.5 to 7.5 percent this year.
He said a “double-headed” dose of stimulus could easily be the antidote to sluggish growth to catapult the economy to 6.5 percent in 2020 even in the face of a projected global economic slowdown.
His comments came after the BSP in December 2019 kept the benchmark interest rates steady at 4 percent amid the continuing benign inflation environment.
Inflation in November 2019 accelerated to a three-month high of 1.3 percent from 0.8 percent a month ago on higher prices of electricity, fuel and selected food items.