THE election spending spells a positive outlook for the Philippine economy this year, a top economist said.
Bank of the Philippine Islands (BPI) lead economist Jun Neri said the country is projected to grow at least 6.5 percent this year.
“Should oil prices stabilize this year, growth may accelerate further as household spending is expected to recover from the 2018 slowdown, and as overall spending activity picks up ahead of the May 2019 mid-term elections,” Neri said.
A recent research by the BPI Global Markets revealed that the country’s GDP is expected to accelerate by at least 6.5 percent this year on the back of capital goods expenditure and a recovery in household spending.
This is a more conservative figure compared to the government’s target of seven to eight percent.
BPI sees inflation returning to the two percent to four percent target on the back of the moderating oil prices in the global market. With inflation in a downtrend, the economy has the opportunity to return to the sweet spot of low-inflation and high growth just as election spending boosts overall demand, the study said.
The report also cited that a manageable widening of the trade deficit is expected to translate to a modest depreciation of the Philippine peso, with additional pressure from global trade disputes and financial market volatility in major markets.
While the US Dollar – Philippine Peso market was closer to the P52 level at end-2018, BPI anticipates a return to the P54 range as early as the second quarter of this year.
BPI said this will be the result of external financial and economic factors along with sustained domestic private and public sector demand for the dollar in 2019 as capital outlays catch up with Association of Southeast Asian Nations norms.
Moreover, the boom in infrastructure is also expected to contribute to the growth of the regions because of enhanced irrigation, flooding and transport systems.
“It enables different regions to become more resilient during typhoons and other disasters,” Neri said.
The report said agriculture and manufacturing were the sources of growth slowdown because both sectors were directly affected by high fuel prices and the implementation of the first package of the Tax Reform for Acceleration and Inclusion (Train) last year.
But the bank anticipates a more positive outlook for 2019 with the expected production performance. Services growth is also expected to remain strong, led by the financial and trade sectors.
“Manufacturing activity may also improve with stabilizing energy prices, just as newly-constructed and rehabilitated irrigation infrastructure could boost agricultural output after a poor showing in 2018. Construction will also benefit from the government’s ‘Build, Build, Build’ program,” Neri said. (JOB with PR)