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 alarm
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.