Economy seen easing anew in 2019
Credit to Author: MAYVELIN U. CARABALLO, TMT| Date: Thu, 24 Jan 2019 16:21:52 +0000
Bank economists have offered differing views about how the Philippine economy will fare in 2019 but their estimates all point to growth again missing the government’s target.
Following Thursday’s announcement of gross domestic product (GDP) growth results for 2019, economists from Standard Chartered Bank and HSBC both forecast continued expansions in the 6-percent range, below the official 7.0-8.0 percent goal.
GDP growth came in at 6.2 percent last year, short of the government’s downwardly revised 6.5-6.9 percent target.
Standard Chartered economist Chidu Narayanan said 2019 could see an acceleration to 6.4 percent while HSBC economist Noelan Arbis forecast an easing to 6.0 percent.
“Domestic consumption is still likely to remain the biggest growth driver in 2019, while infrastructure investment, both public and private, is likely to support growth,” Narayanan said.
“We expect trade to remain in deficit through 2019, but narrow relative to 2017-18. Net exports is likely to subtract less from the headline in 2019 than it did in 2018; net exports detracted 2.9 ppts (percentage points) from the headline in 2018,” he said.
Arbis, meanwhile, tagged a delay in the national budget and slower private investment as possibly weighing on growth this year.
“The first risk to growth is a continued impasse on the 2019 budget, which prevents the government from starting new projects and forces it to re-enact last year’s budget to fund government programs,” he said.
This means the government will be unable to implement its spending plans for the year until February at the earliest, which would limit first quarter growth.
State spending is expected to recover in the latter part of the year as the government pursues an expansionary fiscal agenda.
“We believe another risk to growth in 2019 is a potential decline in private investment,” Arbis continued, noting that cumulative policy rate hikes of 175 basis points in 2018 had translated to higher bank lending rates and funding costs for corporates.
He also noted that money supply was running tight, with excess liquidity parked at the central bank at multi-year lows amid higher government requirements given a wider 2019 budget deficit of 3.2 percent of GDP.
“These factors could risk crowding out private investment and slowing growth,” Arbis said.
Still, he underscored that private consumption was likely to gain more traction this year due to slower inflation, higher remittances and election-related spending.
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