Fitch unit, economists trim Phl growth forecasts

MANILA, Philippines — A unit of the Fitch Group now sees a weaker economic growth for the Philippines this year after a slower-than-expected expansion in the third quarter.

Fitch Solutions Macro Research said it has revised downwards its gross domestic product (GDP) forecasts to 6.2 percent this year and 6.1 percent for next year instead of 6.3 percent.

The country’s GDP growth eased further to 6.1 percent in the third quarter  – the lowest in three years – from the revised 6.2 percent in the second quarter and 6.6 percent in the first quarter.

This brought the average expansion to 6.3 percent in the first nine months of the year, lower than the revised 6.5 to 6.9 percent GDP growth set by the Development Budget Coordination Committee (DBCC).

“We believe that the Philippine economy will struggle to reverse its waning growth momentum over the coming quarters owing to tighter monetary conditions, deepening trade tensions, as well as a declining business environment,” Fitch Solutions said.

The research arm of the debt watcher said private consumption growth would continue to remain weak amid tightening monetary conditions, sustained elevated inflation, and declining consumer confidence.

Recent data showed private consumption growth eased significantly to 5.2 percent in the third quarter from 5.9 percent in the second quarter, while capital formation decelerated to 16.7 percent from 21.5 percent.

“The slowdown in private consumption and investment growth was in line with our view, and we continue to expect both GDP components to perform poorly over the coming quarters. In our view, private consumption growth is likely to remain soft over the coming quarters owing to declining consumer confidence, tightening monetary conditions, and sustained high inflation,” it added.

Noelan Arbis, economist at British banking giant HSBC, said the bank has lowered its GDP growth forecasts for the Philippines to 6.5 percent for 2018 and 2019 from the previous 6.8 percent due to a marked slowdown in consumer spending brought about by high inflation and lower remittances growth.

“We expect private consumption to stabilize amidst easing inflationary pressures and a possible pick-up in remittances by year-end, but heightened import growth is likely to remain a drag on growth,” Arbis said.

ING Bank Manila senior economist Nicholas Mapa said the Dutch financial giant slashed its GDP growth projection for the Philippines to 6.2 percent instead of the revised 6.3 percent for this year.

ING Bank was originally looking at a 6.8 percent GDP growth for the Philippines this year.

For the fourth quarter, ING Bank lowered its projected growth to six percent instead of 6.2 percent.

“Q4 growth is seen to moderate further with household final consumption seen to decelerate further while the drag from net trade will likely remain. Offsetting these two factors will be a possible pick-up in government spending ahead of the mid-term elections while business investment is seen to remain healthy,” Mapa said.

Mapa added GDP growth for 2019 would settle at 6.3 percent with strong growth seen in the first half on election related spending.