By Lee C. Chipongian
Singapore-based ASEAN+3 Macroeconomic Research Office (AMRO) has downgraded its Philippine growth estimate from 6.3 percent to a flat six percent for 2019 on some external and domestic pressures that could impact end-of-the-year growth, which was already affected by budget delays.
“Heightened uncertainties in the external environment could exert further pressures on the Philippines’ growth and prompt financial market volatilities.
Macro-economic policies should focus more on supporting growth amid global headwinds,” according to AMRO Lead Economist Dr. Siu Fung Yiu who was in the country recently for AMRO’s Annual Consultation Visit to the Philippines.
This is the third time AMRO downgraded its 2019 growth forecast for the country, from 6.4 percent to 6.3 percent last June to the latest assessment of six percent. For 2020, AMRO projects 6.4 percent growth.
“Macro-economic policies should focus more on supporting growth amid headwinds from a slowing global economy,” noted AMRO.
On the external accounts sector, AMRO said the current account deficit could get bigger in the second half of the year with investments and growth. Their assessment mirrors that of the Bangko Sentral ng Pilipinas (BSP) which also expects a wider current account deficit as the country’s import requirements expand. “Even so, the full-year current account deficit is expected to be lower in 2019 than in 2018. The easing bias of major central banks globally will help sustain capital inflows,” said AMRO.
AMRO added: “The main short-term risks facing the Philippine economy stem from external sources. The intensifying US-China trade conflicts, major central banks’ policies, and a hard Brexit, have weighed on business sentiments and investment spending.”
AMRO said these uncertainties will only add to global market volatilities and contribute further to slowing global growth. “Domestically, policy restrictions on Philippine Offshore Gaming Operators and the ban on the establishment of new economic zones in the National Capital Region may lead to downward pressures on the property markets. For the longer term, although labor productivity in the Philippines has improved substantially after the global financial crisis, sustaining this trend remains a challenge.”
On Thursday, the World Bank also downgraded the country’s 2019 GDP growth projection to 5.8 percent from a previous 6.4 percent estimate, citing the same factors as AMRO pointed out – the slowing global economy and ongoing trade conflict between two large economies.