AMRO expects PHL economic growth to pick up

THE PHILIPPINES will remain “resilient” with the rest of Southeast Asia and the region’s three major neighbors in the north, “heightened global risks and stronger external headwinds” notwithstanding, with the country’s economic growth picking up this year and the next, according to latest assessments the ASEAN+3 Macroeconomic Research Office (AMRO) released early this morning.

The ASEAN+3 Regional Economic Outlook (AREO) 2019, titled “Building Capacity and Connectivity for the New Economy”, put AMRO’s projection for Philippine gross domestic product (GDP) expansion at 6.4% this year — retained from the last estimate in February under the group’s 2018 Annual Consultation Report on the country which in turn was bumped up from the 6.3% penned in the January update of last year’s AREO — and 6.6% next year from the three-year-low 6.2% in 2018.

AMRO — initially formed as a company in April 2011 and transformed into an international organization in February 2016 — conducts macroeconomic surveillance and supports implementation of the Chiang Mai Initiative Multilateralization currency swap arrangement which the 10 members of the Association of Southeast Asian Nations (ASEAN), as well as China, Japan and South Korea (ASEAN+3) adopted to help avert any financial crunch.

Its latest projections compare to projections of two credit raters as well as multilateral lenders and international organizations that slashed estimates in the face of the delayed mid-April enactment of the Philippines’ 2019 national budget and external factors like simmering Sino-US trade tensions. Specifically, latest GDP growth projections are 6.2% for Fitch Ratings; 6.3% for S&P Global Ratings; 6.4% for the World Bank and the Asian Development Bank, as well as 6.5% for the International Monetary Fund, as well as by the UN Department of Economic and Social Affairs, the UN Conference on Trade and Development and the five UN regional commissions including the United Nations Economic and Social Commission for Asia and the Pacific.

The inter-agency Development Budget Coordination Committee in mid-March slashed its 2019 GDP growth assumption to 6-7% from 7-8% originally as the government operated on a reenacted budget, and some state economic managers have said the government will be hard-pressed to catch up with the state spending program this year.

Under AMRO’s latest GDP growth projections, the Philippines will be outpaced by Vietnam but will still be better off than ASEAN’s three other major economies (Malaysia, Singapore and Thailand), even China, as well as the ASEAN+3 region as a whole for both 2019 and 2020.

AMRO also sees headline inflation slowing to a flat three percent this year and next — in line with central bank forecasts for the same years — from 2018’s 5.2% that was a near-decade peak.

In its latest assessment, the group said “[e]conomic growth is expected to gradually recover on the back of buoyant domestic demand and will likely expand by 6.4% in 2019, albeit with the balance of risks to growth tilted to the downside.”

AMRO noted that “buffers remain adequate” even as the country’s “external position has weakened” as the current account deficit widened to an equivalent of 2.4% of GDP in 2018. Latest central bank data show gross international reserves rising for the fifth straight month to $83.199 billion last month, the biggest amount in nearly two-and-a-half years and “more than sufficient to cover the country’s gross external financing needs.”

“Monetary conditions have tightened, but credit continues to expand,” the group noted in its latest report, adding that “[c]redit growth is anticipated to remain elevated, but as real borrowing cost starts to rise, it is likely to moderate.”

“Major risks” to the Philippine economy, the group noted, “are mostly short-term ones”, citing “escalating global trade tensions, still-”elevated inflation” amid “uncertainty from global oil prices” as well as “[r]apid credit growth over the past several years [that] could give rise to financial vulnerabilities.”

“Overall,” it said, “risks appear to be moderating.” — Reicelene Joy N. Ignacio