The Philippine Statistics Authority
recently announced that the country's GDP grew 6.1% in 4Q 2018
bringing 2018 full year growth to 6.2%, missing the government's
downward-revised 6.5 to 6.9% target and slower than the 6.7% growth
recorded in 2017.
Improvement was seen in the
industry sector as it grew 6.9% in the fourth quarter, buoyed by
the uptick in construction registering a growth of 21.3%. According
to the Department of Budget and Management, infrastructure and
other capital outlays in the first 11 months surged to 49.7% to Php
728.1 billion. This cements the continuing driving force of the
Build, Build, Build program. In line with this, we believe the real
estate space will be reaping the benefits as the government
continues to ramp up infrastructure spending.
While government spending remains
stable, household consumption is expected to recover as soon as
inflationary pressures subside. Despite the sluggish movement of
the economic growth in 2018, the government maintained its target
GDP growth of 7 to 8% from 2019 to 2022.
No cause for
The staggered increase in GDP in
2018 is caused by the rapid increase of inflation brought about by
a depreciating peso and surge in oil prices. We have already seen
receding inflationary pressure late in 2018 and into 2019 with the
January inflation rate dropping to 4.4%, the slowest in the past
nine months. With expectations of inflation easing this year, we
could expect a pause in the policy rate hike that could lead to a
slash of 25 to 75 basis points in 2019. With the easing monetary
conditions, the country may be able to improve its growth
trajectory and surpass last year's growth rate. Lastly, as
new infrastructure is completed, the country should be able to feel
its benefits in the coming years; albeit at a slower pace than
adjustments in monetary policy.
The Duterte administration sees
2018 GDP as a "firm finish" to the year, making the country one of
the fastest growing economies in Asia. It was reiterated
that, in terms of economic growth, the Philippines is still in the
same leagues as India, Vietnam, and China. According to
National Economic Development Authority, it also shows that the
country even outpaced Indonesia and Thailand during the first three
quarters of 2018.