FMIC expects PH economy to regain strength this year

By Chino S. Leyco

The investment banking arm of the Metrobank group expects the Philippine economy to regain its strength this year despite the delayed approval of the national budget and hiccups in the Duterte administration’s tax reform programs.

Following the expected slower growth pace growth last year, First Metro Investment Corp. (FMIC) is projecting that the country’s gross domestic product (GDP) may grow by 6.8 percent to 7.2 percent this year as the nation’s microeconomic fundamentals remain strong.

While the delayed passage of the 2019 general appropriations act (GAA) and the lower than expected revenues from the first tax reform law are negative factors to GDP, FMIC economist Victor A. Abola still believes these downsides will be compensated by stronger private sector consumption.

Abola also said that sustained fiscal stimulus from the government’s ambitious infrastructure spending will continue to fuel the economy.

The economist likewise said that the recovery in manufacturing and tourist arrivals along with hefty election spending would further boost this year’s GDP.

FMIC’s latest growth forecast, however, is slower than the Duterte administration’s target of 7.0 percent to 8.0 percent for 2019.

“The Philippine economy is again in a grown trajectory,” Rabboni Francis Arjonillo, FMIC president said, citing the expected slower inflation this year is also helping growth to move at a faster rate.

Arjonillion added that the Duterte administration’s tax reform programs, anti-corruption drive, red tape reduction, broadening the base of the financial system and facilitation of new as well as disruptive technologies are also fuelling the GDP.

FMIC is estimating that the rate of increase in consumer prices would taper off to 3.0 percent to. 3.5 percent this year owing to normalisation of food supply and lower oils prices, while overseas Filipino remittances will sustain its 2.0 percent to 4.0 percent expansion.

After the anaemic exports last year, FMIC expects it will recover by 4.0 percent to 8.0 percent this year, while imports would continue its robust double-digit growth of 10 percent to 14 percent amid government and private sector investments.

Because of the Philippines’ widening trade deficit, FMIC said that the peso would remain under pressure this year and could average around P54 against the US dollar.

Meanwhile, domestic bond interest rates are projected to drop by 50 basis points from last year’s finish amid the weaker inflation, and expected slower policy rate hikes by the US Fed.

FMIC, however, expects the Bangko Sentral ng Pilipinas (BSP) to cut its key policy rates in the second-half of the year following its five hike actions in 2018.