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Philippines: FMIC sees economy growing by up to 6.5%
MANILA, Philippines — The economy can be expected to grow between six percent and 6.5 percent this year as fundamentals remains strong and the government’s catch-up plan for spending on infrastructure and programs is expected to deliver, First Metro Investment Corp. (FMIC) said.
During its mid-year briefing on the economy and capital markets yesterday, the investment banking arm of the Metrobank Group said the growth slowdown in the first quarter of the year was a “blip” that the economy could recover from through the government’s aggressive catch-up plan, falling inflation and loosening monetary policy.
“After a slower-than-expected growth in the first quarter, we expect the rest of 2019 to be better. Our economy will rebound and will be stronger, as we had forecasted earlier this year, driven by robust domestic demand and boosted by solid investment spending,” FMIC president Rabboni Arjonillo said.
“The catch-up plan of the government to bring infrastructure to 5.2 percent of the GDP is very encouraging and would strongly support our growth expectation. Another positive sign is the rapidly declining inflation, which will provide the stimulus for consumer spending,” he added.
Arjonillo noted that for the second half of the year, growth can be expected to clock in between 6.5 percent up to seven percent.
FMIC and its partner research institution, University of Asia and the Pacific (UA&P), see the service and industry sector doing the heavy lifting for the economy this year, growing by seven percent and 6.8 percent, respectively, with tourism seen as an additional catalyst for growth.
Increased government spending for the remainder of the year will sustain the 10 percent to 14 percent growth in imports, but will put downward pressure on the local currency, enabling it to trade between P52 up to P53 per dollar by year-end.
Cash remittances from overseas Filipino workers (OFWs), which power consumer spending in the country, is seen sustaining growth of between two percent to four percent this year.
Household consumption can also be expected to receive a boost with the continuous deceleration in inflation which FMIC and UA&P project to average between 2.7 percent to three percent in 2019, well within the government target of two to four percent this year.
Inflation has steadily fallen since the beginning of the year – with a temporary uptick in May – as food and transportation prices decelerate.
UA&P economist Victor Abola said weaker crude prices – the result of larger spare capacity in oil producing countries – would drive down inflation further to the two percent level by September.
“There were minimal gains in oil prices as production is still above consumption,” he said, noting global oil futures are also falling.
“I’m not very worried about the oil situation because the reality is quite different from 2008 when OPEC had very little spare capacity, now it has a lot of spare capacity. Oil prices had risen only by four, five dollars per barrel. It is below the projected average for the year,” he added.
Global oil prices are still expected to rest within the $60 per barrel level within the year as opposed to above $70 per barrel last year.
Source: https://www.philstar.com/business/2019/07/09/1933063/fmic-sees-economy-growing-65#HjEK1888OTI5zQsE.99