The Philippine economy is expected to recover from a soft patch in the first half of 2019 as the government ramps up fiscal spending. Macro-economic policies should focus more on supporting growth amid headwinds from a slowing global economy. This is according to the preliminary assessment by the ASEAN+3 Macroeconomic Research Office (AMRO) after its annual consultation visit to the Philippines from 30 September to 9 October 9 this year.

The mission was led by AMRO Lead Economist Dr. Siu Fung Yiu, and Director Toshinori Doi and Chief Economist Dr. Hoe Ee Khor participated in key policy meetings. The discussions centered on prospects of the economy, challenges ahead and policy responses.

“We expect the Philippine economy to expand by 6.0 percent in 2019 and 6.4 percent in 2020 respectively, marking a rebound from slowdown caused by the budget delay and spending freeze before the mid-term election.” said Dr. Yiu. “However, heightened uncertainties in the external environment could exert further pressures on the Philippines’ growth and prompt financial market volatilities. Policies should be calibrated to address these challenges.”

Despite a slowdown to 5.5 percent in the first half of 2019, the recent ramp-up in fiscal spending, especially on infrastructure investment, will support stronger economic growth moving forward. Inflation is expected to continue to stay within the 2-4 percent target range for 2019 and 2020, as global oil prices and domestic food prices are likely to be contained and demand pressure to remain subdued.

The current account deficit is likely to widen in the second half of 2019 with the pick-up in investment and growth.

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. The banking system remains sound with stable capitalization and liquidity.