The World Bank’s latest estimates for the Philippines show that the country will weather the world GDP growth slowdown and will be among the fastest-growing countries in East Asia and the Pacific, possibly outpacing China though growing more slowly than Vietnam.

The report said that economic activity in the Philippines “has slowed as surging inflation, capacity constraints, and currency pressures have prompted authorities to hike policy rates,” The steep rise in inflation hike in mid 2018 dampened sentiments of both the business community and the consuming public, who had enjoyed single digit inflation for the 12 months previous. The Government responded by reaching out to the private sector to explain proposed tax reforms and other efforts to enhance the business climate, such as the much touted shortened 11 th Foreign investment negative list, which provides new venues of access to Philippine consumers with cash to spend, as well as a young, educated and service oriented workforce.

It also noted that the 2018 growth outlook for commodity importers in the East Asia and Pacific was “downgraded because of a moderation in private consumption amid rising inflation in the Philippines.”

Though these external and local risks remain, the Philippines’ robust economic base protects it from threats to stability.

World Bank Senior Economist Ms. Rong Qian describes: “Philippines is fairly resilient to external shocks given its strong macroeconomic fundamentals such as having a flexible exchange rate regime, large foreign reserve, low external debt and large inflow of remittances… Risks include uncertainties derived from US-China trade tensions that create uncertainty on the global growth outlook, persistent high inflation, although it seems to be declining already, and
slower than expected public investment growth.”

Equity markets responded quickly to data showing that inflation has slowed in the past 2 consecutive months, with advancing stocks outpacing declining stocks 109 to 82 in the first few weeks of 2019.

Budget Secretary Benjamin E. Diokno noted that the World Bank’s estimates are “consistent” with the government’s targets, saying: “6.6% is still a very decent growth rate”

 

Jennifer Simons-Castillo

jcastillo@tripleiconsulting.com

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