PH ’18 growth seen at minimum 6.8%

The Philippine economy is likely to grow by at least 6.8 percent this year on the back of robust domestic consumer spending and favorable global economic growth, BDO Unibank chief strategist Jonathan Ravelas said.

The projected gross domestic product (GDP) growth rate for this year is seen to build on the estimated 6.7 percent growth in 2017.

With greater purchasing power for consumers and intensified spending for infrastructure following the passage of the Tax Reform for Acceleration and Inclusion (TRAIN) law, the projected growth rate is seen better than the trend growth rate seen in previous years.

TRAIN mandates a reduction in personal income taxes, increasing people’s take-home pay while also imposing higher excise taxes on petroleum, automobiles, coal, mining, tobacco and numerous financial transactions alongside new excise taxes on sugary drinks and cosmetic procedures.

The country’s trend growth rate was at an average of 6.1 percent from 2011 to 2016 or under the term of President Benigno Aquino. During the nine-year Arroyo administration, trend growth rate was at 4.8 percent while trend growth rates during the Estrada, Ramos and Corazon Aquino regimes were at 2.3 percent, 3.1 percent and 3.4 percent, respectively.

The global economy, Ravelas said, was characterized by a synchronized upturn, continuing policy normalization or increases in interest rates from postglobal financial crisis lows and rising commodity prices.

The economist said the global upturn would likely boost the country’s economic growth rate to 6.8 percent. At the same time, he said the passage of TRAIN would boost consumption while more structural reforms would likely be implemented by the Duterte administration in the next 12-18 months.

Overall, he said the Philippine macrothemes were attractive demographics, continued pursuit of structural reforms and sound macroeconomic fundamentals.

The key risks this year, Ravelas said, were geopolitical tensions, the pace of the US Federal Reserve’s increase in interest rates and US inflation rates as well as the pace of Philippine government spending and local monetary policy.

The Philippines has remained among Asia’s fastest growing economies, posting a year-on-year GDP growth of 6.9 percent in the third quarter of 2017, outperforming the consensus forecast of 6.6 percent. This brought average nine-month growth last year to 6.7 percent, despite coming from a high base in 2016—a presidential election year—during which GDP grew by 6.9 percent for the full year.

Growth also exceeded expectations, given that a band of Islamic extremists affiliated with the ISIS terrorist group wreaked havoc on Marawi, the capital city of Lanao del Sur in Mindanao.