DBS expects Philippines to sustain growth momentum in 2019

MANILA, Philippines — DBS Bank of Singapore expects the Philippines to sustain its economic growth momentum until next year as the government pursues its massive infrastructure build up.

In a report, Masyita Crystallin, economist for the Philippines and Indonesia at DBS, said the Philippine economy may grow 6.5 percent in 2019 from the projected 6.3 percent this year.

The projected growth for 2018 and 2019 are slower than the 6.7 percent GDP expansion recorded in 2017.

“Growth has decelerated this year, but the Philippines remains one of the fastest growing country in Asia,” she said.

The economy expanded to a three-year low of six percent in the third quarter from 6.2 percent in the second and 6.6 percent in the third quarter.

This brought the average growth to 6.3 percent in the first three quarters, lower than the revised target range of 6.5 to 6.9 percent set by the Development Budget Coordination Committee (DBCC).

Crystallin said the main support to growth came from both public expenditure and infrastructure projects.

She said the government’s strong commitment to implement Republic Act 10963 or the Tax Reform for Acceleration and Inclusion (TRAIN) Law bore fruit.

“The revenue generated from TRAIN was used for infrastructure development and direct transfers to support consumption of the lower income. Infrastructure related construction was the only sector that picked up recently,” she said.

For 2020, DBS sees the GDP growth moderating slightly to 6.4 percent as global trade trends down.

The economist said the rise in inflation this year was partly related to tax reform law involving higher excises tax for automobile, fuel products, tobacco and sugar-sweetened beverages, as well as higher oil and rice prices.

Inflation averaged 5.1 percent in the first 10 months, exceeding the BSP’s two to four percent target. It is seen slowing down to a range of 5.8 to 6.6 percent in October from a near-decade high of 6.7 percent in October.

Crystallin said inflation is seen exceeding the BSP target next year at 4.7 percent before easing back to 3.5 percent in 2020.