British bank Standard Chartered said Tuesday it expects the Philippine economy to grow 6.4 percent this year, slightly faster than the 6.2-percent expansion in 2018, driven by domestic consumption.
“We see that consumption will be the main driver of economic growth this year. Infrastructure spending will continue to be strong particularly in the second half,” the bank’s economist for Asia Chidu Narayanan said in a news briefing in Makati City.
He said infrastructure spending would not be as fast compared to 2017 and 2018.
The economy grew 6.2 percent in 2018, slower than 6.7 percent in 2016, pulled down by high inflation rate and sluggish turnout in agricultural output.
It missed the official target range of 6.5 percent to 6.9 percent, which was earlier announced by the interagency Development Budget Coordinating Committee.
Narayanan said while the economic outlook remained rosy this year, the current account would continue to be in deficit. “The deficit would be driven by strong imports,” he said.
Standard Chartered said the major risks that should be watched out for this year would include continuing trade dispute between the United States and China, geopolitical tensions and the slowdown of the Chinese economy.
The bank said the US economic growth might slow down a bit to 2.6 percent from 2.9 percent last year, while China was likely to grow by 6.4 percent from 6.6 percent in 2018. Meanwhile, Europe is expected to grow 1.4 percent this year, slower than 1.9 percent in 2018.
Narayanan said inflation rate in the Philippines would likely slow to around 3.5 percent this year from a peak of 6.7 percent in October 2018.
“This may make the Bangko Sentral ng Pilipinas cut policy rate,” he said, although this might not happen soon. July G. Rada
Nicholas Mapa, senior economist of ING Bank Manila, also said Tuesday that with the government retaining the fighting target of 7 percent for 2019, the economy might be in need of a shot in the arm from both the fiscal and monetary side to get closer to the 7 percent target.
“Consumption will likely bounce back with inflation decelerating but the sectors of capital formation and government may be challenged owing to the BSP’s 175 bps rate hike in 2018 and the 2019 budget passage delay,” Mapa said.
“Should the 2019 budget finally be passed, we can hope for the stimulus from the fiscal side to help lift growth even if expenditures will likely be ‘backloaded’ to the second half of the year as the administration chases the 3.2 percent deficit to GDP target,” Mapa said.