Economy tipped to grow at a faster 6.5% pace in 2020

Despite lingering global headwinds, the Philippine economy is likely to grow at a faster pace of 6.5 percent this new year on the back of much-improved government spending, benign inflation and easy monetary settings.

This is according to economist Jonathan Ravelas, chief strategist at BDO Unibank, who also projected that the domestic economy had likely expanded by 6 percent in 2019.

In the year ahead, Ravelas said in a research note that a string of global headwinds remained in the horizon.

“Higher tariffs on manufactured goods, uncertainty of the UK exit from the European Union and geopolitical tension could result in slower global economic growth and volatility in financial markets in 2020. The decline of global GDP (gross domestic product) output, in turn, could cause central banks to continue cutting interest rates to stimulate their respective economies,” Ravelas said.

Despite these global concerns, however, Ravelas said the Philippines was still “looking good” and could grow by 6.5 percent this year.

“The economy could benefit from an aggressive budget spending from government and further reduction in policy and reserve requirements from the central bank,” he said.

Last year, a dovish Bangko Sentral ng Pilipinas (BSP) slashed the reserve requirement on banks by a total of 400 basis points on top of a 75-basis-point reduction in the overnight borrowing rate, a key local interest rate benchmark.

On the fiscal side, Ravelas noted that some P4.1 trillion would be earmarked for public spending under the 2020 budget while an additional P400 billion might also be disbursed from the unspent 2019 budget.

In addition, he projected that resilient domestic consumer demand could benefit from lower inflation, in turn tempered by falling fuel and food prices.

“Consumer prices are well anchored once again and is forecast at 3 percent in 2020,” the economist said.