Stanchart, ING Bank see 6.7% GDP growth

Two European banks expect a 6.7 percent economic growth for the Philippines this year, fuelled largely by the ambitious infrastructure program of the government.

In a press briefing, Standard Chartered Bank economist for Asia Chidu Narayanan said the Philippine economy may expand by 6.7 percent this year.

Narayanan said the Philippines’ trade performance would remain in deficit throughout 2018 as export growth would likely ease to six to eight percent while imports, driven by capital goods, would expand by 10 to 12 percent.

Narayanan expects inflation to edge up in the first half and peak at 3.8 percent either in June or July before staying flat in the second half primarily due to robust domestic demand as well as the impact of the implementation of Republic Act 10963 or the Tax Reform for Acceleration and Inclusion (TRAIN) Act.

Higher infrastructure investment and the passage of the other packages of the Comprehensive Tax Reform Program (CTRP) would add 0.3 to 0.5 percentage points to headline inflation, Narayanan said.

“We see inflation edging higher in 2018, but now worryingly so,” he said.

The economist expect a mild tightening from the Bangko Sentral ng Pilipinas (BSP) starting with a 25 basis point hike as early as the first quarter and another 25 basis points in the third quarter.

“We expect only moderate tightening, as inflation is unlikely to be a major con- cern,” he said.

Narayanan expressed concern about the strong credit growth with both the household and corporate segments registering a 20 percent increase.

“Our monetary conditions index for the Philippines indicates that conditions are now the loosest they have been in three years, increasing pressure on BSP to scale back accommodation,” he said.

Likewise, the economist said the BSP would also likely slash the reserve requirement ratio for banks to 18 percent this year from the current level of 20 percent.

Joey Cuyegkeng, senior economist at ING Bank Manila, said domestic demand would continue to support 2018 GDP growth at a rate of 6.7 percent.

He said household spending would continue to benefit from the remittance growth in the fourth quarter as well as the moderately weaker exchange rate.

“Household and government spending are likely to post strong growth again in 2018,” he said.

Government spending is likely to accelerate as the 2018 budget targets a 16 percent increase this year from the programmed 14 percent growth in 2017 while public infrastructure is targeted to expand 40 percent this year, according to Cuyegkeng.

“We expect infrastructure growth of 20 to 30 percent this year as the government started to roll out large projects in 2017 that feed into some construction activity this year,” he said.