Global threats lurk in the corner for PH economy
Improved government spending in the first half of 2019 would allow the Philippine economy’s recovery but larger policies should be focused on sustaining growth as a global economy teetering toward recession lurks as a major threat.
This was the assessment made by the Asean+3 Macroeconomic Research Office (Amro) earlier this month.
In statement, Amro said despite a slowdown that led to a 5.5 percent gross domestic product (GDP) growth in the first half of 2019, the Philippine economy was likely to get stronger due to a resurgence in fiscal spending, especially on infrastructure.
Inflation, the think tank said, was likely to stay within the 2-4 percent range in 2019 and 2020 with global oil prices and domestic food prices being tamed and demand subdued.
“We expect the Philippine economy to expand by 6 percent in 2019 and 6.4 percent in 2020,” said Amro leading economist Yiu Siu Fung.
This would mark “a rebound from slowdown caused by the budget delay and spending freeze before the mid-term elections,” said Yiu.
But Yiu added that “uncertainties” in the global economy “could exert further pressures” on Philippine economic growth and “prompt financial market volatilities.”
“Policies should be calibrated to address these,” Yiu, who led the mission, said.
According to the group, the Philippines’ current account deficit is likely to widen in the second half of 2019 with a more vibrant investment and growth. But full-year current account deficit was still expected to be lower in 2019 than 2018.
Capital freed by easing interests worldwide was likely to find its way to markets like the Philippines’.
The Philippine banking system remained “sound” because of sufficient capital and liquidity and the government’s commitment to fiscal discipline would help debt from getting out of control. Fiscal reforms would continue to improve revenue collection.
“The main short-term risks facing the Philippine economy stem from external sources,” the group said in its statement.
These risks included escalation of the US-China trade war, policies by major central banks and a hard Brexit. Trade talks between the US and China have not made progress as China was projected to await a replacement for Donald Trump as US president before going full steam in negotiations.
The United Kingdom is headed straight to leaving the European Union without a deal which was likely to set fire to markets worldwide.
“These uncertainties could also exacerbate the current slowing global economy and raise global market volatilities,” said Amro.
The group warned that local policy restrictions on Philippine Offshore Gaming Operators and the ban on the establishment of new economic zones in the National Capital Region may lead to downward pressures on the property markets./TSB
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