ING bullish on PH economy

Dutch banking giant ING sees the Philippines’ trend growth rate during the six-year Duterte administration improving to about 6.5 percent even if the economy would be left to an “auto pilot” mode.

But if the Duterte administration would be successful in ushering in a “golden age of infrastructure,” there will be more upside to gross domestic product (GDP) growth vis-a-vis the government’s target range of 7-8 percent, ING Philippines economist Joey Cuyegkeng said in a briefing to clients yesterday.

Cuyegkeng’s projected trend growth rate of 6.5 percent for 2017 to 2022 is an improvement from the 6.1 percent average growth rate seen in 2011 to 2016 under the term of former President Benigno Aquino.

A 6- to 6.5-percent growth rate is feasible even without any new reforms, the economist said.

During the nine-year Arroyo administration, trend growth rate was 4.8 percent while the rates during the terms of Estrada, Ramos and Corazon Aquino were 2.3 percent, 3.1 percent and 3.4 percent, respectively.

To date, Cuyengkeng sees the Philippine economy still in a “sweet spot of relatively fast growth and low to moderate inflation.” He noted that economic drivers were broadening, with the agriculture and industry services—and not just services—now contributing to growth.

Under this administration, ING expects the industrial sector to grow by 8.1 percent and the farm sector to expand by 3 percent. Services were seen to sustain a growth rate of 6.6 percent.

But Cuyegkeng said a big jump in growth would probably not occur because the country was financing growth in a way that it was getting money out of consumers. “Hopefully, the multipliers on government spending is much better moving forward,” he said.

The first four months of the year were relatively disappointing in terms of spending but there was an improvement in May.

Meanwhile, as investments account for a bigger share of the consumer-driven economy, Cuyegkeng said this would jack up import demand and translate to a weaker exchange rate. This is especially since the trade deficit is seen to overshadow overseas remittance flows.

On the peso depreciation, Cuyegkeng said there was a decoupling of the Chinese currency from the rest of the Asian currencies, with the rest of regional currencies weakening. A hawkish outlook or bias for monetary tightening by major central banks is also gnawing on regional currencies.

In the case of the peso, Cuyegkeng said 20 percent of the recent depreciation could be attributed to “political” factors rather than actual demand for foreign exchange.