MANILA, Philippines – The United Nations (UN) said it expects Philippine economic growth to rebound this year as the government ramps up implementation of its ambitious “Build, Build, Build” infrastructure program.
In its World Economic Situation and Prospects 2019 report, the UN said it sees the Philippines’ gross domestic product (GDP) growth to have had slowed to 6.3 percent in 2018 from 6.7 percent in 2017.
The government will report on the country’s fourth-quarter and full-year 2018 GDP performance on Thursday.
It targets 6.5-6.9 percent growth for 2018, even as actual GDP expansion averaged 6.3 percent during the first three quarters.
“In the Philippines, GDP growth in 2018 was affected by a slowdown in household spending due to a rapid increase in inflation,” the UN said.
Last year, inflation or the rate of increase in prices of basic commodities hit a 10-year high of 5.2 percent due to new or higher excise taxes slapped on consumption, skyrocketing global oil prices during the third quarter, as well as domestic food supply bottlenecks that pushed prices higher, especially of rice.
The UN noted that “surging inflationary pressures in the Philippines prompted its central bank to increase rates at a sharp pace,” referring to the move of Bangko Sentral ng Pilipinas (BSP) to increase interest rate to a total of 175 basis points last year.
The Philippines, nonetheless, enjoyed accelerated public investment growth in 2018, “driven mainly by the implementation of large transport development projects,” and the UN expects this to be sustained this year.
In 2019 and 2020, the UN projected the Philippines’ GDP growth at 6.5 percent and 6.4 percent, respectively.
The UN’s forecasts for the next two years were below the government’s 7-8 percent target range starting this year until 2022.
This year, “growth will be mainly driven by strong government spending and infrastructure investment,” the UN said, referring to “Build, Build, Build.”
A total of 75 flagship projects were part of “Build, Build, Build” aimed at ushering in a “golden age of infrastructure” by the time President Rodrigo Duterte ends his term in 2022.
“However, the economy faces the risk of persistently high inflationary pressures, prompting a more aggressive stance on monetary policy tightening, thus further constraining private consumption,” the UN added.
For 2019 and 2020, the UN projected headline inflation to ease to 4 percent and 3.2 percent, respectively, returning within the government’s 2-4 percent target range. /kga