THE Bangko Sentral ng Pilipinas (BSP) and the Department of Finance expect the country’s economy to bounce back this year after expanding to 5.9 percent in 2019, its slowest in eight years, missing the government’s target.
“A GDP growth of 7 percent looks attainable this year,” BSP Governor Benjamin Diokno said in a message on Thursday after the Philippine Statistics Authority announced the full-year growth figure, which he described as “impressive” despite falling short of the Duterte administration’s 6 to 6.5-percent 2019 growth goal.
The timely approval of this year’s P4.1-trillion national budget, he added, would boost the construction sector and state spending, which rose by 11.8 percent and 18.7 percent, respectively, in the fourth quarter.
“The Philippines is still one of the fastest-growing economies in Asia and in the world,” the central bank chief said.
Finance Secretary Carlos Dominguez 3rd, meanwhile, said that besides the support from the national budget, the extended validity of the 2019 appropriations, the higher revenue take from the implementation of the Comprehensive Tax Reform Program, and the tax administration reforms by the Internal Revenue and Customs bureaus would bolster this year’s fiscal expansion for greater economic activity.
He added that the hoped-for passage of the program’s remaining packages, including the Corporate Income Tax and Incentives Rationalization Act, would increase the country’s global competitiveness; attract more investments, including in micro, small and medium enterprises; and strengthen the local economy amid the global economic slowdown.
“The pickup in growth in the fourth quarter of 2019, resulting in part from the government’s catch-up spending following [the] anemic expansion in the year’s first semester, will gain speed in 2020, with the domestic economy firing on all cylinders as a result of even more vigorous investments in infrastructure and human capital development for the entire year ahead,” Dominguez said.
GDP grew by 6.4 percent in the last quarter, faster than the 5.6-percent, 5.5-percent and 6-percent expansions in the first, second and third, respectively.
The government set a growth target range of between 6.5 and 7.5 percent for this year.
The European Chamber of Commerce of the Philippines (ECCP) shared Diokno and Dominguez’s optimism, saying on Thursday the economy did not disappoint.
“We believe that the economy of the Philippines has been extremely resilient in 2019,” ECCP President Nabil Francis said during the launch of his group’s Doing Business in the Philippines 2020 publication in Makati City.
According to him, economic growth last year was driven mainly by private consumption, supported by remittances from overseas Filipino workers.
Remittances grew by 4.4 percent to $27.2 billion in the first 11 months of 2019, according to the BSP.
Francis blamed the slowdown on external developments, such as the US-China trade war and Brexit, and on the fourth-and-a-half month delay in the approval of the 2019 budget, which he said affected government spending.
Meanwhile, several economists also forecast economic growth to further pick up this year.
In a report, HSBC Global Research Economist Noelan Arbis said GDP was projected to rise to 6.4 percent. The growth, he added, would be “driven by our sustained fiscal spending and fixed investment outlook.”
“President [Rodrigo] Duterte has already signed off on the 2020 budget, in addition to extending the validity of the 2019 budget, providing [his] administration with additional funds to disburse in the year ahead,” Arbis said.
HSBC also expects the BSP to continue its monetary policy easing to boost private investment.
Nomura senior economist Euben Paracuelles was more optimistic, saying the economy would grow further to 6.7 percent.
“We reiterate our above-consensus forecast that GDP growth will accelerate to 6.7 percent in 2020 from 5.9 percent in 2019, driven by higher public investment spending as the government gains more traction on infrastructure projects, as well as private consumption due to tight labor markets and record-low unemployment rates,” he said.
JP Morgan Chase & Co. Economist Nur Raisah Rasid, meanwhile, projected the economy to expand by 6.2 percent.
“The broader macroeconomic narrative for the Philippines has been centered on the investment cycle upturn that began in late 2015. Given the limited scope for a capex (capital expenditure) recovery, specifically in non-construction investment, which has driven the overall investment cycle, the underlying fixed investment momentum could remain modest this year, even as the gradual infrastructure lift will likely be sustained in the coming quarters,” Rasid said.
WITH TYRONE PIAD AND ANNA LEAH E. GONZALES