The Philippine economy is likely to sustain a 6.5-percent growth for the full year before slightly easing to 6.3 percent by next year, New York-based think tank Global Source said.
“Despite a weaker current account and rising US interest rates, we think domestic monetary and financial market conditions remain supportive of growth,” Global Source said in a research note dated Aug. 15 written by economists Romeo Bernardo and Marie Christine Tang.
In the research note titled “Same Old, Same Old,” Global Source said it expected greater contribution from exports to make up for slower growth in domestic demand. It also noted that public spending, including that for infrastructure-building, had picked up lately.
Gross domestic product (GDP) grew by 6.5 percent year-on-year in the second quarter, bringing the first semester average to 6.45 percent.
This year’s second quarter growth was slower than last year’s actual GDP growth of 6.9 percent, which got an extraordinary boost from election spending.
Under the term of President Aquino, the country’s trend growth rate was 6.1 percent, improving from 4.8 percent during the nine-year Arroyo administration. Average GDP growth rates during the Estrada, Ramos and Corazon Aquino administrations were 2.3 percent, 3.1 percent and 3.4 percent, respectively.
On the first year of President Duterte, Global Source said presidential decisions in the socio-economic sphere had so far been a mix bag of good and bad moves.
The “good” decisions, according to the think tank, included the appointment of a solid economic team, continuity in the projects started by the previous administration, major tax reform program, an ambitious infrastructure program, appointments in the Bangko Sentral ng Pilipinas and the P25-billion prosecution and settlement of a major tax evasion case.
Global Source said the “bad” decisions included the appointment of leftists in Cabinet, flip-flopping on rice importation, unaffordable increase in private pension, provision of free irrigation and enactment of free tertiary education in public schools.
“Notwithstanding increased policy unpredictability, the President’s irreverent attitude and outsider image have served him well, evident in his steady and high popularity ratings across all income classes, and the firm consumer and business confidence indices. This suggests to us, especially after the President’s State of the Nation Address, that year 2 of the Duterte administration will be much like year 1 in both rhetoric and governance priorities,” it said.
On politics, Global Source expects the peace process with Muslim separatist groups to advance now that the President has refocused on this and has called off hopeless talks with the communist old guard in self exile for decades in Europe.
“As to the economy, we expect continuity in the reforms started particularly on the fiscal side, albeit the risk of policy choices favoring overtly leftist agendas remains given the President’s own populist bent,” it said.
Downside risks to Global Source’s GDP growth forecast this year could emanate from political concerns, particularly among investors wary of further game-changing pronouncements.