Barcelona-based FocusEconomics sees the Philippine economy expanding at a faster pace of 6.2 percent this year on the back of the massive public infrastructure buildup and ample liquidity of the financial system.
“This year, growth prospects should be more favorable. Ramped up government spending related to its ‘Build, Build, Build’ program should continue to buttress growth,” FocusEconomics economist Lindsey Ice said in a Jan. 23 report.
Ice was referring to the Duterte administration’s ambitious infrastructure program, which the Department of Finance had said included a pipeline of P1.4 trillion in flagship projects.
“Moreover, impetus from lower borrowing costs and fresh liquidity from the reserve requirement ratio (RRR) reductions should also continue to drive domestic demand,” Ice added.
Last year, the Bangko Sentral ng Pilipinas cut key interest rates by a cumulative 75 basis points, on top of the 400-bp cuts in banks’ RRR that unleashed more funds for economic activities.
“That said, pressures on the external sector could intensify from capital imports linked to the public infrastructure projects,” according to Ice, referring to a wider current-account deficit resulting in a weaker peso amid an expected surge in imported goods.
On the external front, Ice said “developments in the US-China trade negotiations will remain an important factor for the outlook: if tensions continue to deescalate that could be an additional tailwind to growth, and vice versa.”
For 2021, FocusEcono
mics expects the Philippine economy to grow by 6.3 percent, although the forecasts for this year and next year were both below the government’s yearly target of 6.5-7.5 percent growth until 2022. INQ