Growth Momentum Now on PHL Side

The 5.6-percent economic growth in the first quarter of 2019 is still healthy and no cause for alarm. The Philippine economy still registered one of the highest growth rates in Asia, and I believe it is poised to expand more robustly in the remaining quarters of the year as the government plays catch-up with the “Build, Build, Build” infrastructure program.

The growth momentum is on our side. The inflation rate continues to decelerate, dropping to a 16-month low of 3 percent in April from 3.3 percent in March. The exchange rate has stabilized at around 52:$1, while the Monetary Board of the Bangko Sentral ng Pilipinas just reduced the overnight borrowing rate by 25 basis points to 4.5 percent, the first time in more than six years after the inflation rate eased to the government’s target range.

Bangko Sentral Governor Benjamin Diokno said the decision was based on the board’s assessment that “the inflation outlook continues to be manageable, with easing price pressures owing to the decline in food prices amid improved supply conditions.”

Global debt watcher S&P Global Ratings on April 30 increased by a notch its long-term sovereign credit rating on the Philippines to “BBB+” from “BBB” with a stable outlook, citing the country’s above-average economic growth, a healthy external position and sustainable public finances. The latest upgrade placed the Philippines on a par with Mexico, Peru, Thailand and Trinidad and Tobago, and above the BBB ratings of Italy, Portugal, Hungary, Panama and Uruguay.

Finance Secretary Carlos Dominguez III is even optimistic the Philippines will attain a credit rating of “A” a debt score normally reserved for highly stable advanced economies within the next two years.

The gross international reserves, meanwhile, rose for the sixth straight month to $83.96 billion in April this year from $83.61 billion a month before and $79.6 billion a year ago, according to data from the Bangko Sentral.

The Philippines successfully returned to the international capital markets, where investors swarmed on the offering of €750 million of eight-year global bonds in the second week of May.

Investment pledges, as collated by the Board of Investments, jumped 46 percent in the first four months to P286.7 billion from P195.7 billion year-on-year after a significant increase in foreign projects. Commitments from foreign investors jumped 2,224 percent in January to April to P66.9 billion from P2.9 billion in the same period last year. Investment pledges from domestic sources also rose 14 percent in the four-month period to P219.7 billion from P192.8 billion a year earlier.

I find all these data and developments encouraging. They lead me to believe that the Philippine economy is still on course to register a 6-percent to 7-percent growth this year. Last week’s generally peaceful midterm elections are also a positive development they reflected the country’s political stability and bolstered further investor confidence.

Malacañang, after being briefed by the country’s economic managers, remains upbeat that the Philippines will still reach the full-year 2019 economic target of 6-percent to 7-percent growth. Socioeconomic Planning Secretary Ernesto Pernia himself expects higher growth in the next few quarters “as the Build, Build, Build infrastructure program starts to gather steam.”

Pernia said the full-year growth target of 6 percent to 7 percent remained possible if the economy would expand by an average of 6.1 percent over the next three quarters.

Dominguez is also bullish. He expects the domestic economy to expand at a higher clip for the rest of the year as inflation continues trending toward the official target range of 2 percent to 4 percent. The finance chief says given the 2019 budget snag, the Philippine GDP growth of 5.6 percent in the first quarter is still a “decent expansion” that has kept the Philippines among the ranks of the region’s fastest-growing economies.

“Economic growth is expected to finish stronger over the April-to-June period and for the rest of 2019 as the government puts Build, Build, Build on the fast lane following the passage of the 2019 GAA and domestic consumption picks up amid cooling inflation,” says Dominguez.

In implementing a catch-up plan to accelerate state investments, he said “the Duterte administration aims to offset the lower spending at the outset of 2019 resulting from the budget delay and the construction ban during the election season.”

“Henceforth, we expect growth to pick up on higher state spending in the continuance of last year’s upward momentum,” he added.