Economic growth seen hitting 6.8-7.2% this year
Credit to Author: MAYVELIN U. CARABALLO, TMT| Date: Tue, 15 Jan 2019 16:21:08 +0000
Investment bank First Metro Investment Corp. (FMIC) believes the Philippine economy will regain momentum this year on the back of the mid-term elections and infrastructure and consumption spending, among others.
“We project the Philippine economy to grow by about 6.8-7.2 percent this year on the back of strong macroeconomic fundamentals,” FMIC President Rabboni Francis Arjonillo said in a briefing on Tuesday.
The government is targeting gross domestic growth (GDP) of 7.0-8.0 percent for the year.
GDP growth is currently running below the 6.5-6.9 goal for 2018 based on latest data, averaging 6.3 percent as of end-September following first to third quarter outturns of 6.6 percent, 6.2 percent and 6.1 percent, respectively.
Fourth quarter and full-year 2018 GDP figures are set to be released on January 24.
Growth in 2017 was 6.7 percent, near the lower end of the 6.5-7.5 percent target.
The growth drivers for 2019, Arjonillo claimed, would be consumption spending, infrastructure, and election spending as well as investments and tourism.
“Weaker inflation, which we expect to be within 3-3.5 percent will positively impact consumption spending,” he added, pointing to an expected normalization of food supply and lower global oil prices.
Headline inflation averaged 5.2 percent last year, hitting the Bangko Sentral ng Pilipinas’ forecast but exceeding the 2.0-4.0 percent target.
“Our optimism is also anchored on the Duterte administration’s tax reform and fiscal stimulus to fund infrastructure growth,” the FMIC executive added.
Stronger tourist arrivals, a manufacturing sector recovery and foreign portfolio investments will also support strong growth, he continued.
FMIC, meanwhile, also projected a possible policy rate cut in the second half of the year and also a more than 2-percent cut in bank reserve requirements.
The Bangko Sentral ng Pilipinas’ policy-making Monetary Board raised key interest rates five consecutive times last year after inflation breached the 2.0-to-4.0-percent target starting March.
One-percentage-point cuts to the reserve ratio, currently at 18 percent, were also ordered in February and May last year.
The Philippine peso, meanwhile, is expected to remain under pressure from a widening trade deficit as imports of capital goods will likely increase in support of the government’s infrastructure push.
The currency, which FMIC estimated to trade at P54 to a dollar this year, ended 2018 at P52.58 versus the greenback, down sharply from its 2017 close of P49.93:$1.
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