MANILA, Philippines — “A tale of two halves.”
That was how a global bank described its 2019 growth outlook on the Philippine economy, which could see “speed bumps” in the first half before lost growth momentum can be regained to cap off the year.
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In a research note dated January 14, ING Bank N.V. said above-target inflation and tighter monetary policy would likely continue to weigh on consumer spending and, in turn, drag the economy in the first semester.
ING Bank also said a public works ban ahead of the May 2019 polls and the delayed approval of the national budget for this year could crimp government spending and weaken the economy.
ING Bank said it expects gross domestic product growth to average 5.9 percent in early 2019 before hitting 6.2 percent by the end of the year. If realized, this would fall below the government’s 7-8 percent full-year goal in 2019.
“Speed bumps are directly ahead though with economic growth expected to slip slightly below 6 percent as higher borrowing costs and still above-target inflation sap consumption and investment momentum,” the bank said.
“Government spending, which has recently been a key source of growth, is expected to struggle in 1H 2019 with an election ban preventing fresh projects and a delay in passing the budget likely to halt last year’s strong growth,” it added.
The Philippine economy grew to a three-year low of 6.1 percent in the third quarter last year, as household spending remains in retreat due to soaring prices and higher interest rates.
In 2018, inflation averaged 5.2 percent, well above the government’s 2-4 percent target range and the highest level since 8.2 percent in 2008. After delivering back-to-back hikes, the Bangko Sentral ng Pilipinas last December kept its key rate unchanged, citing “receding price pressures.”
According to ING Bank, decelerating inflation and possible easing from the BSP could help the economy recover.
“With inflation expected to slip back within target in 1H and the BSP expected to ease, GDP growth momentum may be rekindled to close out the year,” it said. — Ian Nicolas Cigaral