Barclays ‘positive’ on PH growth
CLARK FREEPORT ZONE: Philippine economic growth is expected to stay strong this year but slow somewhat from 2017, British investment bank Barclays said, with above-target inflation a challenge to continued expansion.
“We have been positive on the growth outlook of the Philippines for quite some time. We are forecasting close to 6.5 percent growth for this year,” Barclays Director of Research Rahul Bajoria told reporters at the Marriott Hotel here on Wednesday.
The lender’s 2018 projection represents a slowdown from last year’s actual growth of 6.7 percent and is also lower than the government’s 7.0-8.0 percent target.
Gross domestic product growth fell below expectations in the second quarter at 6.0 percent, bringing the first half expansion to an average of 6.3 percent.
Barclays, Bajoria said, expects structural inflows such as overseas Filipino worker (OFW) remittances and foreign direct investments (FDI), as well as public spending, to be the main drivers of growth for the rest of the year.
“Remittances flows seem to be coming through in the numbers,” he observed.
Personal remittances, which sum up the net compensation of overseas Filipino workers, personal transfers whether in cash or in kind and also capital transfers between households, totaled $2.675 billion in July—up 4.5 percent from a year earlier.
It took year-to-date remittances to $18.462 billion, a 3-percent increase year on year.
Bajoria added that FDI was picking up as well, “which is generally a good indicator that …. you will probably see more investment numbers.”
He, however, estimated that net FDI inflows would reach about $6 billion this year, lower than the over $10 billion posted in 2017.
As of the first half of 2018, net FDI inflows reached $5.755 billion, 42.4 percent higher compared to the same period last year.
“Government spending is also a big driver of growth … as construction momentum sort of picks up and the projects are getting contracted out,” Bajoria also said.
Government expenditures grew by 23 percent to P1.931 trillion in the first seven months of 2018. Of the total, P437.2 billion was spent for infrastructure and other capital spending.
A primary risk to economic growth, Bajoria pointed out, is high consumer price growth that he forecast to average 5.1 percent this year—above the 2.0-4.0 target—before easing to 3.5 percent in 2019.
“Challenges around inflation … are likely to persist for some time but I think the central bank, as it said, is on top of the situation,” he said.
Consumer price growth has exceeded target since March, prompting the Bangko Sentral ng Pilipinas’ (BSP) policymaking Monetary Board to raise key interest rates by a total of 100 basis points. A fresh rate hike is expected to be announced next week after inflation hit a fresh nine-year high of 6.4 percent in August.
Bajoria is one of several local and regional bank analysts, portfolio strategists and economists who joined a BSP-sponsored tour of ongoing developments at the New Clark City.
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