Bleak numbers for global, regional, local growth
THE Philippines is seen to mirror the global economy this year, with a “mild” slowdown foreseen in its growth performance due to international tensions and tighter domestic monetary conditions.
HSBC Chief Market Strategist for Asia Cheuk Wan Fan—who was part of a visiting team to the Philippines for the bank’s annual invesment outlook—told reporters on Wednesday they expect a tamer local growth to the tune of 6 percent for 2019.
This is slower compared to the 6.1 percent in the first three quarters of 2018. It is also below the government’s growth target of 7 to 8 percent for this year.
The economist said among the leading causes of a growth slowdown in the country are tighter liquidity conditions and higher interest rates.
In 2018, the Bangko Sentral ng Pilipinas’s (BSP) main policy rate was incrementally raised by a total of 175 basis points—bringing the latest overnight reverse repurchase rate to 4.75 percent. This was the Central Bank ’s response to the then stubbornly accelerating inflation rate, which hit a peak of 6.7 percent in September and october of 2018.
The slowdown in HSBC’s growth projection for the Philippines mirrors their global 2019 outlook—which is seen to register a mild slowdown for the year to hit 2.6 percent.
“We believe that one needs to try to find the right balance, because it is dangerous to be too bullish, but also to be too bearish. It is clear that there is a global slowdown, but it should be mild, and we expect global equity markets to sustain earnings growth at a high single digit,” HSbC Private banking Global chief market strategist Willem Sels said.
Despite the projected slowdown in growth, Fan still expressed optimism for the other economic indicators in the country.
“We expect private consumption in the Philippines to remain robust this year due to easing inflationary pressures and a potential pick-up in remittances growth,” Fan said.
“The Philippine peso is projected to stay stable and trade at 54 against the US dollar at the end of 2019. We expect the Philippine stock market to perform in line with the regional benchmark on the back of 12 percent earnings growth in 2019,” the analyst added.
on Wednesday, the peso traded slightly weaker compared to the previous day’s trade. The peso was valued at 52.13 against the dollar, 10 centavos weaker than the 52.03 to a dollar rate on Tuesday.
a lso, in a separate report, global think tank asean Macroeconomic research office (amro) said it shaded down its 2018 growth forecast, and warned of increased economic uncertainty for this year.
amro staff revised their asean+3 regional growth for 2018 downward to 5.3 percent from the earlier 5.2-percent forecast.
For 2019, amro sees growth hitting 5.1 percent, with “the already implemented trade protectionism measures.”
“as we enter 2019, global economic prospects have dimmed and grown more uncertain for the first time since mid-2016—a sharp contrast to 2018 where the global economy started on an upbeat note,” an amro blog post authored by its chief economist Hoe ee Khor and senior economist anthony Tan read.
“The baseline outlook in 2019 is a shade weaker, reflecting the maturation of the global business cycle amid weaker impulse from global trade,” they added.
The two economists said the key risks confronting the region are mainly external, the top two being the further escalation of a global trade conflict and weaker growth in advanced economies that could lead to a sharp increase in market volatilities.
amro forecasts Philippine growth to hit 6.3 percent for 2019 —more optimistic than HSbC’s 6-percent forecast but still below the government target range for the year.