DESPITE affirmations of the country’s strong growth momentum following the Philippine Statistics Authority’s announcement of a recovery in the country’s GDP expansion rate in the fourth quarter of the year, the Philippines is still seen to lose traction this year as external factors continue to weigh in on the economy.
In a reaction to the country’s October-to-December growth report, Barclays Research said the Philippines is still poised to grow slower in 2016 at 5.5 percent, although the GDP grew 6.3 percent in the fourth quarter of 2015.
The fourth-quarter GDP expansion brought the average 2015 Philippine growth to 5.8 percent.
Barclays’s statement is a contrast to the government’s 7-percent to 8-percent target growth range, which has been said to be “achievable” by government officials following the positive sentiment brought about by the fourth-quarter growth.
Barclays said the gains in the expected pickup in government spending is expected to be negated by the soft global growth outlook for the year.
“Although [the GDP] print was above expectations, we remain comfortable with our 2016 growth forecast of 5.5 percent, as upside risks from higher government and investment spending are mitigated by downside risks from a deteriorating external economy, which is weighing on export of goods and services,” Barclays said in a report.
Meanwhile, in terms of monetary policy, Barclays said the Bangko Sentral will likely stand pat and retain current monetary-policy settings in its first meeting for the year two weeks from now.
According to Barclays, the central bank will likely wait for the growth to regain its pace before hiking interest rates.
“On the monetary-policy front, we continue to expect BSP’s next policy move to be a hike, though we only see a first hike coming in the second quarter of 2017,” Barclays said.
“We think the central bank is likely to hike when growth has recovered sufficiently and inflation is high enough to justify an increase in interest rates,” it added.
At present, monthly inflation rates continue to be short of the central bank’s 2-percent to 4-percent target range, owing mainly to the steep slump in oil prices in recent weeks.
Most recently, central bank Gov. Amando M. Tetangco Jr. forecast inflation to fall between 0.8 percent and 1.6 percent, as the decline in power rates, lower domestic oil prices and downward adjustment in the minimum jeepney fare could offset the slight uptick in rice prices, as well as the annual sin-tax adjustments.
“Although there is external uncertainty in the form of the Fed rate-hike cycle, we think the Philippines’s strong external position and low level of short-term debt provide the BSP with enough policy space to maintain an accommodative stance even if US rates head higher,” Barclays said.
The central bank is set to have its first monetary-policy meeting for the year on February 11.
1 comment
it was due to the Present Administration’s Driving force was for war on Drugs and war on Crime, which cost to much Government Budget for killings of drug addicts and has a little drive for the growth economy… Philippines was becoming more socialist (just like China) rather than being a capitalist (just Like America)