MANILA, Philippines — The research arm of debt watcher Moody’s expects the Philippines to miss its 2019 growth goal despite a recovery in gross domestic product (GDP) expansion during the third quarter.
“While growth has picked up, economy is still not on track to achieve the government’s 6-7 percent target for 2019. GDP would need to increase at least 6.7 percent in the fourth quarter to reach this goal, a level of expansion not seen in the Philippines since 2017,” Moody’s Analytics said in a Nov. 8 report.
The GDP grew by a faster-than-expected 6.2 percent during the July to September period, as Moody’s Analytics noted of the boost from higher government spending and personal consumption.
Moody’s Analytics also noted that the agriculture sector reversed the 1.3-percent decline in farm output during the second quarter as it rose 3.1 percent year-on-year in the third quarter.
At end-September, GDP growth averaged 5.8 percent, up from the first half’s dismal 5.5 percent amid underspending on public goods and services at the start of the year due to late budget approval.
However, Moody’s Analytics said “the Philippines appears to be suffering from uncertainty in global trade, much like the rest of Asia.”
It noted that exports inched up by only 0.2 percent year-on-year while growth a year ago was double-digit. “External demand was dragged down in September by metal components, which dropped 25.8 percent year-on-year. Clothing was down 20.7 percent and transport equipment fell 20 percent,” it said.
Also, “gross capital formation continued to fall [during the third quarter] by 2.1 percent year-on-year, indicating that the central bank’s loosening monetary policy is not enough to overcome economic headwinds,” Moody’s Analytics added.
Amid easing inflation, the Bangko Sentral ng Pilipinas (BSP) cut the policy rate by a cumulative 75 basis points to 4 percent so far this year.
Governor Benjamin E. Diokno had said the BSP was already done as far as interest rate cuts were concerned, hence will keep key rates as is until yearend.
The Monetary Board—the BSP’s highest policy-setting body—will meet on Thursday, Nov. 14, to discuss the monetary policy stance.
Before 2019 closes, key interest rates will again be tackled by the Monetary Board on Dec. 12. /muf