Given the widely anticipated recovery in the country’s local output, measured in gross domestic product (GDP) growth, levels for such in the fourth quarter is seen to settle at 6.6 percent.
This was learned from ING Bank senior economist Nicholas Mapa as he noted on the acceleration in government spending to drive such.
“The Philippine economy hit a speed bump in first half with growth slipping to below 6 percent for the first time in four years as robust consumption failed to offset slower government spending and lackluster capital formation,” Mapa said.
Pegged at 6.6 percent for the fourth quarter, the analyst likewise noted that the government will be able to hit its growth target for 2020 along with another round of cuts in the rate at which the Bangko Sentral ng Pilipinas (BSP) borrows from and lends to banks.
“The 1-2 punch from the fiscal and monetary fronts will help carry growth momentum with growth forecast to hit 6.5 percent in 2020. Given the government’s ambitious growth target of 6.5 to 7.5 percent, we forecast further easing from the BSP to restore lost growth momentum, especially in investment activities,” Mapa explained.
“ING expects BSP to cut rates by 50 basis points in 2020 with the first rate cut expected in the first quarter as benign inflation dynamics allows the central bank to focus on the growth objective,” he added.
The bank analyst said that given these developments along with the anticipated in sync operations of 2019 and 2020 budget, the country’s economy is expected to “fire on all cylinders.”
“The prospect of the 2019 and 2020 budget plans operating simultaneously helps solidify the expectation that fiscal stimulus will join monetary stimulus to propel growth back to target. With the prospect of robust consumption (on low inflation), the potential tag-team of the 2019 and 2020 budget mustering a sizeable fiscal punch and the return of capital formation in response to BSP easing, we project the economy to return to form and fire on all cylinders,” the economist said.
“With consumption, government spending and eventually capital formation hitting their stride, we forecast growth to crest 6 percent in 2019 and eventually 6.5 percent in 2020 as we utilize the tried and tested formula for above 6 percent growth,” he added.
To recall, the government’s most senior economic officials held firm on their view that achieving the lower end of their 6 to 7 percent growth target remains achievable.