BPI economist says: Infra delays could derail Philippines growth

CEBU, Philippines —  The Bank of the Philippine Islands (BPI) has expressed confidence of the country’s economic play in 2020, with government’s serious thrust in infrastructure spending.

However, BPI lead economist Jun Neri warned that delays and challenges in the implementation of infrastructure projects may prevent growth from surging beyond 6.5 percent.

“As we have seen in 2019, infrastructure development plays an important role and its failure could pull down growth and derail the momentum of the economy,” explained Neri.

The Philippine economy expanded by 6.4 percent in the fourth quarter of 2019, faster than the 6.3 percent growth that it recorded in the same quarter in 2018 and in line with market consensus.

Despite this, full year 2019 growth fell below the 6 percent level at 5.9 percent.

He explained that the speed bumps in 2019 derailed the economy's growth momentum and prevented it from sustaining its 7-year streak of above six percent growth.

In 2020, the private sector investment spending may also recover on the back of lower interest rates.

Neri said the fundamentals of the economy still provides the necessary conditions for investment spending as corporates need to expand their productive capacity through the purchase of fixed assets in order to meet the requirements of consumers.

Household consumption will likely continue to be the main driver of growth in 2020 with support from OFW remittances and manageable inflation.

However, inflation may climb back to the 3-4 percent level in 2020 as base effects from oil and rice disappear.

Global oil prices may see upward pressure from changes in shipping regulations, production cuts from oil producing countries, and geopolitical tensions in the Middle East, but global trade uncertainties may temper this.

BPI’s average inflation forecast for 2020 is currently at 3.4 percent.