The Philippines Did Quite Well in 2018
I believe we did quite well as a nation in 2018, despite a more challenging global economic environment. This is evident in the 6.3-percent GDP expansion in the first three quarters.
While the growth was below expectations, the Philippine economy remained one of the fastest-growing in Asia, along with Vietnam and China. The doomsday scenario predicted by critics did not happen after all.
Bangko Sentral ng Pilipinas (BSP) Deputy Governor Diwa Guinigundo explained that several reforms propelled the economy to an impressive streak of 79 consecutive quarters of uninterrupted growth.
What started as a challenging year amid global anxieties turned out to be not that bad. Not even the stock-market slump, the sharp rise in petroleum prices, the realignment of the European Union with the impending exit of the United Kingdom, the trade war between the US and China and the currency crisis in several countries could temper business confidence in the Philippines.
US online news site Business Insider in fact ranked the Philippines at the top of the list of 20 best countries to invest in this year.
What happened in 2018 showed the resilience of the Philippine economy amid all the external challenges. Although the inflation rate, or the movement in consumer prices, hit a nine-year high of 6.7 percent in October, it eventually softened to 6 percent in November, with all indications pointing toward further deceleration in the coming months.
Oil and rice prices, the biggest contributors to the consumer price index, began to stabilize. Once the Rice Tariffication measure takes effect, inflation is expected to moderate further.
This is complemented by appropriate monetary policy. The BSP raised the overnight borrowing rate by a total of 175 basis points in five consecutive Monetary Board meetings to 4.75 percent to contain inflation but chose to halt the rate hike in its last meeting on December 13 on indications of moderating prices.
The peso depreciated aroundd 6 percent against the US dollar this year, mainly a result of a generally strong greenback as President Donald Trump tried to reinvigorate the US economy.
Remittances from Filipinos working overseas grew 3.1 percent in the first 10 months to $23.1 billion, supporting the country’s balance of payments (BoP). The BoP, however, yielded a $4.74-billion deficit in the first 11 months, mainly because of strong imports that now amount to $8 billion to $10 billion a month. The economy’s strong demand for capital goods and raw materials to support the “Build, Build, Build” infrastructure program of the government is fuelling the robust import growth.
While the gross international reserves declined $5.7 billion since the start of the year to $75.49 billion as of November, they remain at a healthy level, enough to cover 6.9 months worth of imports of goods and payments of services.
Fortunately, the oil market has stabilized, with Brent prices now below the $60-a-barrel mark. This would hopefully put less pressure on the peso and help tame the inflation rate.
The stock market, meanwhile, appeared to have bottomed out in November. The market has strongly recovered after losing 11.6 percent from the start of the year.
Fitch Ratings, one of the three major global debt watchers, affirmed the Philippines’ investment-grade score of “BBB” with a stable outlook, saying growth prospects remain favorable.
“The Philippines is less vulnerable to large outflows compared with some of its neighbors in the region, given lower nonresident holdings of domestic debt and equities, although foreign outflows are likely in 2019 as global monetary conditions continue to tighten,” Fitch said.
The Philippines may even see a record net inflow of over $10 billion in foreign direct investments this year. Data from the BSP show that FDI net inflows in the first three quarters climbed 24.2 percent to $8 billion from $6.5 billion a year ago, as investors continue to prefer the Philippines as one of the best places to put their capital.
Fitch said the recent passage of the 11th Regular Foreign Investment Negative List could further ease restrictions on foreign investment and contribute to economic expansion.
“Inflation pressures now appear to be easing, partly due to recent monetary policy tightening and easing of some supply-side pressures. We forecast GDP growth to remain strong in 2019 and 2020 at around 6.6 percent, supported by robust private consumption and public investment,” Fitch said.
GDP per capita is expected to reach $3,179 by the end of 2018, according to Fitch’s estimates, putting the Philippines among middle-income economies.
To recap, it looks like we have weathered the crisis. Considering what is happening in the world, we did quite well. I believe that 2019 will put us back to an even stronger growth trajectory.
Happy New Year to all!