2019News

S&P keeps PHL growth forecast

By Bianca Cuaresma, March 7 2019; Business Mirror

https://businessmirror.com.ph/2019/03/07/sp-keeps-phl-growth-forecast/

Image Credit to Business Mirror

INTERNATIONAL credit watcher S&P Global Ratings said the Philippines is still expected to grow at 6.4 percent for 2019, unchanged from their previous views of the economy despite the declining inflation trend and the appreciation of the local currency in recent months.

In a webcast on Wednesday afternoon, S&P Asia Pacific economist Vince Conti said their forecast for the country’s growth in 2019—despite being significantly better than most emerging economies in the region—is only “marginally better” than the 6.2 percent gross domestic product (GDP) performance of the country in 2018 despite seemingly better metrics at the start of 2019.

Conti explained that growth for this year is expected to be dampened by a combination of weak global trade, as well as the lingering effects of the “necessary” aggressive rate hike made by the Bangko Sentral ng Pilipinas in 2018.

The S&P economist said global trade is “not in a good space at the moment” and Philippine exports are expected to slow, particularly as demand for electronics—one of the country’s main exports—slows. Trade disputes are also seen to dampen overall trade growth across the world, thereby affecting the numbers of the country.

Investment growth, on the other hand, is also expected to be affected by the 175-basis-point interest rate hike set out by the Bangko Sentral ng Pilipinas (BSP) in 2018 in an effort to bring inflation back to target.

With inflation as one of the major concerns in the Philippines’s 2018 growth story, S&P economists agree that easing inflation pressures are expected to be positive for the country’s growth story for 2019.

In 2018, higher global oil prices, increase in taxes and supply shocks to food put inflation on an acceleration path, to peak at 6.7 percent in September and October before being mitigated by both monetary and nonmonetary policies by the national government.

Latest data from the Philippine Statistics Authority (PSA) showed that inflation fell back on track within target in February—yielding a 3.8-percent growth for the month. This is within the 2- to 4- percent target set by the government for this year up until 2021.

The easing inflation path, S&P analysts said, are seen to give the BSP the policy space to potentially “cut rates a couple of times toward the end of the year.”

Should the BSP decide to reverse its tightening moves and cut its rates this year, Conti said the pace of their adjustments will be “slow” to make sure not to put inflation at risk again.  S&P currently rates the Philippines at “BBB” with a positive outlook.

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