MANILA — The investment banking arm of the Metrobank Group expects the country’s economy to rebound in the second half of 2019 and grow by 6 to 6.5 percent by year-end, on the back of healthy government spending and easing inflation.
First Metro Investment Corporation (FMIC) president Rabboni Francis Arjonillo said the country’s gross domestic product (GDP) could expand by 6.5 to 7 percent in the second half after slowing to 5.6 percent in the first quarter.
“The catch-up plan of the government to bring infrastructure spending to 5.2 percent of GDP is very encouraging and would strongly support our growth expectation,” he said in a press briefing.
Arjonillo said robust domestic demand, solid investment spending, and decelerating inflation which will provide the stimulus for consumer spending, could also drive economic growth.
University of Asia and the Pacific (UAP) economist Dr. Victor Abola said the approval of the budget for 2019 “opens the gate” for the government to catch-up on its plans to spend.
“I’m not very worried about the oil situation because the reality is quite different from 2008 when OPEC (Organization of the Petroleum Exporting Countries) had very little spare capacity,” he said, noting that OPEC and some top oil producers currently have a lot of spare capacity.
Abola said the inflation rate is projected to decelerate from 2.7 to 3 percent this year, as weaker crude oil prices and lower food prices drive inflation further down.
He considered the Philippine economic slowdown in the first quarter of 5.6 percent a “blip”.
The re-enacted budget slowed the pace of economic growth in January to March.
The FMIC further said tourism is an additional catalyst that will propel growth. Tourist arrivals in the first four months of the year rose by 8.5 percent to 2.87 million and are expected to increase to 8.2 million by year-end.
Due to the global economic slowdown amidst the US-China trade war, exports are expected to grow weaker at 2 to 6 percent. Imports will continue to outpace exports and are anticipated to sustain a double-digit growth of 10 to 14 percent on the back of strong government infrastructure spending and private investments.
Arjonillo believes the US-China trade war is not a “bane” to the Philippines.
“We are not totally dependent on exports. We are service-led, our domestic consumption is what fuels the economy. Our government spending is what fuels the economy so I think the trade war will not mean to us relative to how it is impacting exporting countries like Singapore, Thailand, Japan, Korea, these are the ones that will get hit hard,” he told reporters.
The Philippine peso will remain under pressure for the rest of the year and is estimated to trade at PHP52 to PHP53 to a dollar. It will depreciate slightly due to Bangko Sentral ng Pilipinas’ reduction in reserve requirement ratio (RRR) and measures to rebuild its gross international reserves. (PNA)