GDP growth to accelerate next year — HSBC

MANILA, Philippines — British banking giant HSBC expects a faster economic growth for the Philippines next year as almost half of the flagship priority projects under the government’s Build Build Build program go on stream.

Joseph Incalcaterra, chief economist at HSBC, said the Philippine economy may expand by 6.4 percent next year.

“Our assumption for a pick-up in investment supports our forecast for growth in the Philippines to accelerate to 6.4 percent in 2020, defying weak external demand,” Incalcaterra said.

Incalcaterra said the National Economic and Development Authority (NEDA) has approved 37 out of 75 flagship priority projects and are moving to implementation stage under the government’s massive infrastructure buildup.

He said $27 billion worth of projects are due to start construction this year, mostly in the second half.

“There are various projects entering construction stage this year, including the monumental Manila Subway, which will cost approximately $10 billion. Construction started in February, and drilling operations are set to begin in 2020,” Incalcattera said.

Incalcaterra said the government is likely to sharply accelerate infrastructure spending to reach its infrastructure spending target of seven percent of GDP by the end of President Duterte’s term in 2022.

According to Incalcaterra, the government has generally met its ambitious infrastructure spending targets in previous years – addressing its history of underspending.

However, given the one-off budget issues during the first half of this year, the original target would not be met.

Based on the revised 2019 budget, the government is now targeting to spend 5.2 percent of GDP on infrastructure this year, which points to a sharp rebound in spending in the second half.

Incalcaterra said capital expenditure as a share of corporate revenue would remain high in the Philippines.

“This may be due to the fact that the government has historically under-invested, suggesting private firms have partly filled the gap,” he said.

The delayed passage of the 2019 national budget has pulled down the GDP growth to a four-year low of 5.6 percent in the first quarter from 6.3 percent in the fourth quarter.

Economic managers lowered their GDP growth target to a range of six to seven percent after easing to 6.2 percent in 2018 from 6.7 percent in 2017.