By Joann Villanueva/PNA
MANILA — A Standard Chartered Bank economist expects more mileage from the Philippine economy in 2019, with a print of 6.4 percent from last year’s 6.2 percent, through the help of consumption and infrastructure investments.
In a briefing Tuesday, Standard Chartered Bank economist for Asia Chidu Narayanan said he expects consumption to remain among the major growth drivers of the domestic economy this year, as inflation is seen to continue its deceleration.
The rate of price increases was elevated last year on account of supply-side factors, to include the lack of supply of rice and several other agricultural products, which in turn, pushed prices up.
However, with the combination of monetary and non-monetary measures, inflation slowed down to 6 percent last November and 5.1 percent last December after peaking at 6.7 percent in the previous two months.
Last year, inflation averaged at 5.2 percent, above the government’s 2 percent to 4 percent target for 2018 to 2020.
Narayanan forecast inflation to “drop quite drastically” this year and average at 3.5 percent, with “headline inflation to fall below 2.5 percent in the second half of the year.”
The continued slowdown in inflation will encourage people to spend more, which in turn will boost consumption.
Narayanan projected domestic consumption growth to be “slightly slower than in 2018 and 2017 but, nevertheless, the biggest driver of growth.”
He, on the other hand, noted that with infrastructure investment seen to remain strong, driven to a large degree by government’s infrastructure program, the country’s current account deficit will likewise persist.
The current account has been posting negative figures, after being in surplus for many years, as importations grow to address the continued expansion of the economy.
“The reason for that is, for the deficit to persist is because we think infrastructure inputs will still be very strong,” the economist said.
With more infrastructure projects to be implemented in the coming years, imports growth is seen to outpace exports, thus, the continued deficit in the current account.
Narayanan, however, cited that current account deficit this year will likely be smaller than last year “because most of these projects are supposed to be finishing.”
Meanwhile, the economist discounted a downward adjustment in the Bangko Sentral ng Pilipinas’ (BSP) policy rates this year after the total of 175 basis points increase last year if growth remains strong.
“If that underachieves and comes on the lower half of the 6 percent handle, then that would mean that the likelihood of cut in the central bank (rates) increases,” he said.
“So our base case is not for any move for the central bank but we think the likelihood of policy rate cuts from the central bank is significant if growth under-achieve in the first half of the year,” he added.
To date, the BSP’s overnight reverse repurchase (RRP) rate is at 4.75 percent.
