‘POLITICAL UNCERTAINTY COULD WEIGH ON GROWTH’
PHILIPPINE economic growth may end up weaker than expected given signs that investors are being discouraged by the political climate, a research consultancy said. “Whereas both the consensus and the IMF (International Monetary Fund) are expecting growth over the next five years of around 6.5 percent 7 percent, we think growth is likely to be closer to 6 percent,” London-based Capital Economics said in a report authored by Alex Holmes.
It noted that rapid investment growth — averaging above 10 since 2010 — was one of the factors that enabled the Philippines to escape the “sick man of Asia” tag.
The country has also jumped up the rankings of various international league tables that measure competitiveness, the number of business regulations and corruption levels.
However, investment as a share of gross domestic product (GDP) is still lower than elsewhere in the region, Capital Economics said.
“If the Philippines is to maintain rapid growth it requires more capital deepening. It is no surprise that the fastest growing EMs (emerging markets) over the past couple of decades have typically been those with high investment rates” the report notes.
On the plus side, Capital Economics pointed out that the government was planning on ramping up infrastructure investment, with spending expected to rise to 6 percent of GDP by 2020 from 4 percent in 2016.
“The World Bank has estimated that developing countries such as the Philippines need to spend the equivalent of 5.5 percent of their GDP a year to ensure that inadequate infrastructure doesn’t become a major drag on devel- opment,” the report states. The governments strong fiscal position means it has the resources to meet its ambitious plans, Capital Economics said, adding that tax reforms likely to be passed by Congress before the year ends should boost revenues to around 1 percent of GDP.
“In any case, the low level of government debt and small budget defivit means that the Philippines has the fiscal space to borrow and invest more,” it noted.
But while government investments should continue to grow at a rapid pace, the outlook for private investment is less promising as companies need a stable and predictable business environment.
“While [President] Rodrigo Duterte
and motorcycles; financial and insurance activities; other community, social, and personal activities; manufacturing; and information and communication..
Net foreign assets (NFA) in peso growing by 6.4 percent in the previous month.
The central bank said its own NFA position declined in Septem international reserves.
The NFA of banks, meanwhile, increased as foreign assets ex- panded at a faster pace due to higher loans and investments in marketable debt securities.
Lending accelerates
Bank lending growth, meanwhile, accelerated to 21.1 percent from August’s 20.4 percent.
Including reverse repurchase placements (RRPs) with the central bank, lending growth increased by 20.1 percent from 17.9 percent in the previous month. Month-onmonth and seasonally-adjusted, commercial bank lending increased by 1.8 percent and 2.9 percent, respectively, for loans net of RRPs and loans inclusive of RRPs.
Lending for production activi- ties, which accounted for over 88.8 percent of the aggregate loan portfolio, grew by 20.7 percent, faster than August’s 19.5 percent.
This was driven by real estate activities (16.8 percent); electricity, gas, steam and air conditioning supply (24.1 percent); wholesale and retail trade, repair of motor vehicles and - cial and insurance activities (20.4 percent); other community, social, and personal activities (174.9 percent); manufacturing (10.3 percent); and information and communication (38.8 percent).
“Bank lending to other sectors also increased during the month except in public administration, defense and compulsory social security, which declined by 0.8 percent,” the central bank said.
Loans for household consumption slowed to 20 percent compared with August’s 22.8 percent as an expansion in credit card loans was tempered by the slower growth in motor vehicle loans, salarybased general-purpose loans and other types of household loans.
“Going forward, the BSP will continue to ensure that the expansion in domestic credit and liquidity conditions proceeds in line with overall economic growth while remaining consistent stability objectives,” the central bank said.