Fi­nance dep’t sees 2018 GDP up 6.5%

Business World - - The Economy -

FI­NANCE Sec­re­tary Car­los Dominguez said the econ­omy will sus­tain growth ex­ceed­ing 6% this year, as in­vest­ment and in­fra­struc­ture spend­ing help counter the im­pact of higher in­ter­est rates.

“We’re con­fi­dent that we can weather the storms but we’re not com­pla­cent,” Dominguez said in an in­ter­view with Bloomberg Television in Bali on Thurs­day, when asked about in­fla­tion. “Def­i­nitely, ris­ing in­ter­est rates will have a detri­men­tal ef­fect on our growth prospects but we’re still ex­pect­ing around 6.5% growth for the whole year.”

Eco­nomic growth slowed to a three­year low of 6% in the se­cond quar­ter, with the gov­ern­ment set to re­port third-quar­ter data on Nov. 8. The Philip­pines is bat­tling surg­ing prices and a weak­en­ing cur­rency that’s forced the cen­tral bank to raise in­ter­est rates by 150 ba­sis-points since May.

Mr. Dominguez, a mem­ber of the cen­tral bank’s Mone­tary Board, said fu­ture ac­tions will de­pend on the data. Deputy Gov­er­nor Diwa C. Guini­gundo on Wed­nes­day said pol­icy mak­ers are ready to tighten mone­tary pol­icy fur­ther if needed.

“We will act ap­pro­pri­ately de­pend­ing on what the data shows,” Mr. Dominguez said. “If more ag­gres­sive ac­tions are re­quired, we will take it. If not, we will ease off.”

Higher tax rev­enue and “a tremen­dous amount” of loans from China, Ja­pan and South Korea will help the Philip­pines fund its in­fra­struc­ture pro­gram that’s counted on to cush­ion the econ­omy from risks such as the trade war, Dominguez said. The Philip­pines had as­pired for a 7% to 8% growth this year, which is no longer at­tain­able, ac­cord­ing to at least two eco­nomic of­fi­cials.

In­fla­tion ac­cel­er­ated to 6.7%in Septem­ber, the fastest pace in more than nine years. The peso has lost about 8% this year, among the worst per­form­ers in Asia. The bench­mark stock in­dex is head­ing for its low­est level since De­cem­ber 2016 af­ter a record streak of for­eign­ers’ with­drawals.

The gov­ern­ment is com­fort­able with the cur­rent level of the peso as it ab­sorbs shocks, Mr. Dominguez said. “We don’t want these pres­sures to build up and not be re­flected in the in­ter­est rates or the ex­change rate,” he said.

The gov­ern­ment has enough funds and can af­ford to con­tinue re­ject­ing bids from in­vestors seek­ing higher rates on bills and bonds, Mr. Dominguez said.

The Bu­reau of the Trea­sury sold just about half of the 90 bil­lion pe­sos ($1.7 bil­lion) of gov­ern­ment se­cu­ri­ties of­fered in Septem­ber, as banks sought higher yields. The gov­ern­ment is turn­ing to global in­vestors with a plan to sell $1.5 bil­lion of dol­lar bonds and up to $500 mil­lion of debt de­nom­i­nated in eu­ros or Swiss francs. —

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