Philippine growth forecast in 2018 raised but still below government target

MANILA, Philippines — The Philippine economy will likely sustain its robust expansion in the near-term, although below the government’s expectation, according to a regional think tank that nonetheless raised its growth outlook for the country.

“The Philippine economy continues to enjoy favorable macroeconomic prospects despite a slight moderation in growth and the small deficit in the current account balance in 2017,” ASEAN+3 Macroeconomic Research Office (AMRO) said in a report.

AMRO said the economy may grow by 6.8 percent in 2018 from its previous estimate of 6.7 percent, before accelerating to 6.9 percent next year on expectations of “buoyant” exports and gradual improvements on budget execution.

However, the think tank’s growth forecast fell below the government’s 7.0-8.0 percent projection for 2018 until 2022, even as it qualified that President Rodrigo Duterte’s aggressive infrastructure plan is expected to “lift growth momentum in the near-term.”

The country’s gross domestic product—or the value of all finished goods and services produced in the country—grew 6.7 percent in 2017,  settling within the government’s 6.5-7.5 percent target range for the year but slower than 2016’s 6.9 percent print.

The government aims to spend P8.4 trillion in infrastructure until 2022 to boost economic growth to 7-8 percent starting this year.

‘Risk pockets’

In the same report, AMRO flagged some “risk pockets” in the rollout of the Duterte administration’s infrastructure drive, including “weak” implementation capacity of the government and private sector participants.

“Notwithstanding these structural impediments, a strong pick-up in public infrastructure spending, accompanied by a crowding-in of private investment, cannot be ruled out, and this could cause the economy to overheat and the external imbalance to widen,” AMRO said.

“Against these risks, monetary policy should be on guard against an intensification of demand induced pressures with core inflation having trended upwards in recent months,” it added.

“Finally, reforms to stimulate private investment and address the labor market mismatch would complement initiatives to support the infrastructure drive, and pave the way for an improvement in the economy’s productive capacity.”