ECONOMIC GROWTH should pick up in 2019 following a slower-than-expected climb this year, according to two analyses issued on Tuesday, boosted by election spending and strong domestic demand.
S&P Global Ratings sees gross domestic product (GDP) growth improving to 6.4% next year from a 6.2% forecast for 2018. On the other hand, analysts at Nomura Global Research sees growth improving to 7.1% from 6.3%.
Philippine GDP grew 6.7% in 2017. The government targets growth to clock in at 6.5-6.9% this year before surging to 7-8% in 2019.
Growth has been underwhelming so far this year, averaging 6.3% in the nine months to September as rising prices discouraged household spending, a key growth driver of GDP growth.
Still, the Philippines will remain a growth leader in the region, as most rated economies here are expected to see slower expansion rates in 2019. India will post the fastest expansion at 7.6% next year, from 7.4% this year.
In a report, the credit rater pointed out that Asia-Pacific economies are “losing steam” amid slowing global trade, largely due to United States-China frictions that will take a particular toll on manufacturers.
“We do not expect these global growth drivers to reverse in 2019 and so growth should keep slowing,” S&P said, noting that growth across Asia Pacific will ease to 5.3% from a 5.4% forecast this year.
“We agree that some countries could, over time, benefit from higher inflows of foreign direct investment if multinationals relocate parts of their supply chains away from China. However, the short-term spillovers from worsening trade and investment friction would likely be damaging…”
Another risk comes from tighter financial conditions, especially if US interest rates were to rise faster than expected. In the Philippines, a surge in world crude prices and a weaker peso has stoked inflation, spurring five consecutive interest rate hikes, so far, from the Bangko Sentral ng Pilipinas (BSP), S&P noted.
The Philippines will also buck the regional trend in Nomura’s eyes, as growth is seen to pick up next year, driven by stronger domestic demand plus a “near-term boost” from election-related spending. The state’s aggressive spending push, largely for infrastructure, should also spur economic activity.
“Exports will remain a drag, given slower global growth and the tech downcycle. However, we note that, while electronics exports make up around 60% of total goods exports, import content is relatively high, and so Philippine value-added is low,” the bank said in a separate report.
“Importantly, we believe that any drag will be more than offset by still-robust domestic demand, particularly an expected surge in investment spending which should receive added near-term impetus as public infrastructure projects, including at the local level, are pushed for completion ahead of the elections.”
Playing a key role would be a surge in capital investments, whose growth should quicken to 23.9% from an already-high 16.5% this year.
Softer inflation should also assist a rebound in household consumption, Nomura said. — Melissa Luz T. Lopez

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