Asean think tank retains 6.4% growth forecast for Philippines

MANILA, Philippines — Singapore-based ASEAN+3 Macroeconomic Research Office (AMRO) has retained its 6.4 percent growth forecast for the Philippines this year, higher than the four-year low 5.9 percent growth last year.

Based on results of its annual consultation report for the Philippines for 2019, the regional think tank said that stable macroeconomic fundamentals combined with easing monetary policy will contribute to the recovery of economic output this year.

The timely passage of the 2020 national budget will also ensure an increase in government expenditure of priority programs and projects.

“Going forward, growth is expected to continue to recover, led by a further increase in government expenditure. Overall, the economy is expected to grow by 6.4 percent in 2020,” AMRO said.

AMRO noted that while inflation can be expected to pick up to three percent this year, growth over the next few months will be benign as global oil prices and domestic food prices are likely to stay low and demand will be subdued.

In 2019, inflation averaged at 2.5 percent, well within the government target of two to four percent, compared with a high base of 5.2 percent in 2018.

“The government’s effort to make up for the fiscal underspending in the first half of 2019 and to avoid any budget delay in 2020 is welcome. Given the subdued inflationary environment, monetary policy should be on an easing bias to support the economy in case growth turns out to be weaker than expected,” AMRO said.

It said the main short-term risks facing the Philippine economy currently emanate from external sources as global policy uncertainties remain and business sentiment remain depressed.

On the upside, the moderation of global oil prices and easing of global financial conditions provide a respite.

Domestically, policy restrictions on Philippine offshore gaming operators (POGOs) and a ban on the establishment of new economic zones in the National Capital Region could place downward pressure on the property market, AMRO said.

Amid these global headwinds, however, opportunities remain in the current wave of reconfiguration of global supply chains.

“The Philippine authorities should continue to push forward key reforms and ensure effective implementation of ongoing reforms to lay a good foundation for long-term sustainable development,” AMRO said.