STRONG domestic demand despite increasing global uncertainty is expected to help the Philippine economy rise to between 6.2 and 6.6 percent this year, First Metro Investment Corp. (FMIC) said on Tuesday.
In a briefing in Taguig City, the investment banking arm of the Metrobank Group explained this demand would be underpinned by increased consumer spending and the government’s plan to bring infrastructure spending to 5.7 percent of the country’s gross domestic product (GDP).
FMIC’s latest forecast falls below the government’s growth target range of between 6.5 and 7.5 percent for this year. Latest data showed that GDP accelerated to 6.2 percent in the third quarter after the slower-than-expected 5.6-percent and 5.5-percent expansions in the first and the second, respectively.
“The Philippine economy will grow faster in 2020 compared to 2019, fueled by stronger consumer spending, easing monetary conditions and [a] growing tourism sector,” FMIC President Rabboni Francis Arjonillo said during the briefing.
“Consumer spending, which accounts for 66 percent of the country’s GDP, will expand further, driven by robust government and infrastructure spending, [a] higher employment rate, manageable inflation and robust remittances from overseas Filipino workers,” he added.
FMIC projects infrastructure spending to hit 5.4 to 5.8 percent of GDP this year.
Also at the briefing, University of Asia and the Pacific economist Victor Abola highlighted the “historic” jobs data reported by the government last December.
That data — from the latest Labor Force Survey released by the Philippine Statistics Authority — showed that 43.146 million individuals had jobs, up 4.4 percent from last year’s 41.325 million.
Unemployment, meanwhile, fell to an estimated 4.5 percent from 5.1 percent last October and underemployment dropped to 13.0 percent from 13.3 percent a year ago.
FMIC projected inflation to stay low at an average of between 2.5 and 2.8 percent this year from 2.5 percent in 2019, and expected remittances to maintain its 2- to 4-percent growth.
Personal remittances reached $27.61 billion in the January-to-October 2019 period, up 4.3 percent from $26.47 billion a year earlier.
FMIC also expected the Bangko Sentral ng Pilipinas to cut banks’ reserve requirement ratio (RRR) by 1 to 2 percent and reduce policy rates by 50 basis points from their current levels.
The investment bank said it expected tourism-arrival growth of 15 percent to 6.8 million in the first 10 months of 2019 to be sustained.
It also said the Philippine peso might weaken to P53 per dollar this year on the back of a wider trade deficit as the government ramps up infrastructure spending.
The projection falls within P51 to P54 peso-dollar assumption set by the Development Budget Coordination Committee for this year, but is weaker than the P50.63:$1 peso-dollar closing in 2019.
Last, FMIC said risks to Philippine economic growth include negative investor sentiment over regulatory reforms, geopolitical tensions and natural disasters.