The economy having performed well in the first quarter, should do even better in the months ahead and in the coming year, according to ING Bank Manila economist Joey Cuyegkeng.
He said expectations of a more moderate inflation in 2019, for instance, as well as the impact of spending related to next year’s midterm elections, should help spur greater household spending.
The price of goods and commodities have risen above target in recent months, although the Bangko Sentral ng Pilipinas (BSP) said this was likely transitory and should normalize again next year.
In particular, for this year, the BSP projects inflation averaging no more than 4.6 percent. They also expect price pressures to go down to 3.4 percent by next year. The target average inflation rate for both ranges from 2 percent to 4 percent.
The Philippines is also expected to hold its midterm senatorial elections next year to fill in 12 of the 24 seats at the Senate.
In 2016, a presidential election year, the economy grew by 6.8 percent, but slowed to 6.7 percent the following year.
For this year, Cuyegkeng projects growth averaging 6.8 percent and even better growth of 6.9 percent in 2019.
These forecasts, however, are below the government’s 7-percent to 8-percent expansion range for this year and next.
The economic managers at the recent economic briefing in Subic said the 7-percent to 8-percent growth target remain “doable” and “achievable” for this year and next.
The Philippine Statistics Authority (PSA) last Thursday released growth data showing a 6.8-percent expansion in local output or the GDP in the first three months.
With project continued economic expansion, Cuyegkeng said this provides the BSP room to manipulate its policy rates this year and next year.
Just last week the BSP raised the main policy lever by 25 basis points from 3 percent to 3.25 percent. BSP Governor Nestor A. Espenilla Jr. explained the rate hike should help temper the accelerated rate of inflation in the coming months.
Some analysts argue the BSP should be more aggressive and do another rate hike, instead of adopting the wait-and-see stance for now when the price of commodities and goods have clearly elevated.
The policy-making Monetary Board is scheduled to reconvene in another six weeks or on June 21 to decide if another interest-rate recalibration is warranted.