Fitch So­lu­tions cuts Phl out­look

The Freeman - - BUSINESS - (GMA News On­line)

Eco­nomic head­winds the coun­try is fac­ing both do­mes­tic and over­seas com­pelled Fitch So­lu­tions Macro Re­search to lower the Philip­pines’ eco­nomic growth out­look for 2018 and 2019.

In light of the coun­try’s gross do­mes­tic prod­uct (GDP) re­sults in the third quar­ter, the af­fil­i­ate of Fitch Rat­ings Inc. be­lieves that “... the Philip­pine econ­omy will con­tinue to strug­gle to re­verse its wan­ing growth mo­men­tum over the com­ing quar­ters ow­ing to tighter mone­tary con­di­tions, deep­en­ing trade ten­sions, as well as a de­clin­ing busi­ness en­vi­ron­ment.”

The Philip­pine gross do­mes­tic prod­uct grew at a slower pace of 6.1 per­cent in the third quar­ter, com­pared with the pre­vi­ous quar­ter and the same com­pa­ra­ble pe­riod in 2017, the Philip­pine Statis­tics Au­thor­ity (PSA) re­ported on Thurs­day.

The third quar­ter GDP com­pares with the re­vised 6.2 per­cent in the sec­ond quar­ter of 2018 and the re­vised 7 per­cent in the third quar­ter of 2017.

“Ac­cord­ingly, we are low­er­ing our fore­casts for real GDP (gross do­mes­tic prod­uct) growth to come in at 6.2 per­cent for 2018 and 6.1 per­cent in 2019, from 6.3 per­cent pre­vi­ously,” Fitch So­lu­tions said.

Its fore­cast is below the gov­ern­ment’s tar­get of 6.5 to 6.9 per­cent for 2018, and 7 to 8 per­cent for 2019 un­til 2022.

“Risks to our growth fore­casts are weighted to the down­side," Fitch So­lu­tions noted.

It cited the deep­en­ing trade ten­sions be­tween China and the US weigh­ing on global risk sen­ti­ment, and a faster-than-ex­pected rate hik­ing cy­cle in the US that could ex­ac­er­bate a pos­si­ble cap­i­tal flight to safety and weigh against for­eign in­vest­ment.

“The Philip­pines has re­bal­anced to­wards China un­der Pres­i­dent Duterte, but the two coun­tries con­tinue to be at odds re­gard­ing mar­itime claims in the South China Sea,” Fitch So­lu­tion said.

“A flare-up of ten­sions be­tween both sides would dam­age eco­nomic co­op­er­a­tion and could see China pull out of in­fra­struc­ture in­vest­ments in the Philip­pines,” it said.

Fixed cap­i­tal for­ma­tion is also ex­pected to grow slower over the com­ing quar­ters as the strong pub­li­cled in­vest­ment drive un­der the Duterte ad­min­is­tra­tion’s flag­ship “Build, Build, Build” pro­gram is un­likely to off­set a slow­down in pri­vate in­vest­ment growth.

“More­over, the im­ple­men­ta­tion of the sec­ond pack­age of the Tax Re­form or Tax Re­form for At­tract­ing Bet­ter and High-Qual­ity Op­por­tu­ni­ties (TRABAHO) ap­pears to be cre­at­ing un­cer­tainty for busi­nesses,” Fitch So­lu­tions said.

The sec­ond tax re­form pack­age aims to slash cor­po­rate in­come tax rates and ra­tio­nal­ize fis­cal in­cen­tives to off­set po­ten­tial rev­enue losses.

“Even if the tax re­form bill falls through (which seems un­likely af­ter the amount of de­lib­er­a­tion), the un­cer­tainty would slow in­vest­ment growth in the com­ing months,” Fitch So­lu­tions said.

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