By Melissa Luz T. Lopez
Senior Reporter
CLARK, PAMPANGA — Growth should have bounced this quarter from the preceding three months’ slowdown on the back of a “phenomenal” infrastructure drive, a global bank analyst said, although full-year expansion will likely settle below seven percent.
Rahul Bajoria, director for research at Barclays Bank PLC, said Philippine economic growth could clock in 6.5% this quarter when it is reported on Nov. 8, fueled by even stronger state spending.
Philippine gross domestic product (GDP) grew by a disappointing six percent in April-June as household spending cooled. This brought the first-semester climb to 6.3%, slower than the year-ago 6.6% and lower than the government’s 7-8% full-year target for 2018
“For the third quarter, we expect a bit of a pickup from the second quarter numbers,” Mr. Bajoria said in a media briefing yesterday at the Clark Marriott Hotel.
“Actually the activity numbers domestically were very strong… so we probably could have a growth rate of about 6.5%.”
The bank economist said he remains upbeat about local growth prospects, with the biggest boost coming from the “Build, Build, Build” initiative of the Duterte administration.
“The infrastructure story has been quite real. We see that across a various set of numbers: investment growth has gone from around 22 to about 27% as a share of GDP in the last 3-4 years, which is quite phenomenal,” Mr. Bajoria said after a site visit to the New Clark City being constructed in Capas, Tarlac on Wednesday morning.
“That number is still moving higher in our own projections.”
But S&P Global Ratings said in a Sept. 18 report that infrastructure development plans across Southeast Asia could hit a snag amid concerns about sharp currency swings, a global trade war and higher interest rates.
It flagged that projects in the Philippines may be affected by the mid-term elections in May 2019 amid possible policy shifts under new political officials.
Still, Mr. Bajoria said big-ticket projects run by the national government appear on track to be realized by 2022.
For Katsuhiko Yasui, president of the Japanese investment firm SMBC Nikko Securities Ltd., the Philippines is well-positioned to pursue aggressive construction activities with a “healthy” fiscal position and low debt burden. Its young population is also “good for growth.”
Mr. Bajoria added that bigger remittances and continued foreign direct investment (FDI) inflows should also help stoke economic activity, coupled with strong government spending as the infrastructure drive continues.
At the same time, household consumption will likely remain “on the softer side” between July-September amid surging prices of goods.
Barclays sees FDIs totalling $6 billion this year, coming from the record $10.049 billion recorded in 2017. Inflows reached $5.755 billion as of June, according to the Bangko Sentral ng Pilipinas (BSP).
Elevated inflation as well as a depreciating peso pose the biggest near-term risks to growth, Mr. Bajoria said, although the outlook for the Philippines remains sanguine.
“We have been positive about the growth outlook of the Philippines for quite some time. We are still forecasting close to 6.5% growth this year, probably increasing next year as the construction momentum picks up with the projects that are getting contracted out,” the bank analyst said.
Inflation surged to a fresh nine-year-high 6.4% in August, breaching market expectations at a time of elevated global oil prices and thin rice supply. August’s pace brought the eight-month overall increase in prices to 4.8%, well above the BSP’s 2-4% target.
Meanwhile, the peso has been trading at fresh 12-year lows over the past week as it breached the P54 level versus the dollar. This drives up import costs though it gives overseas Filipino workers’ families more pesos for the dollars they get.
Economic managers have said that the infrastructure has been gaining steam to sustain the GDP growth momentum until 2022.
Phase 1A of the New Clark City will house the National Government Administrative Center and a sports complex composed of a stadium, aquatic center and athletes’ village, which are targeted to be opened by late 2019 for the country’s hosting of the Southeast Asian Games.
The entire development spans 9,450 hectares and stretches all the way to Capas, Tarlac. The land is owned by the Bases Conversion and Development Authority and is being developed by private builders MTD Philippines and Filinvest.

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