A ranking portfolio manager of ATR Asset Management Inc. (ATRAM) forecasts a 6.3-percent expansion for the Philippine economy this 2020 on expectations of sustained robust consumer spending and government infrastructure spending.
The growth projection, however, is lower than the government's 6.5-7.5 percent target for this year.
In an economic briefing at the Insular Life Building in Makati City Wednesday, ATRAM global multi-asset portfolio manager Ivan Ante said government's infrastructure spending will be among the main pillars of domestic growth this year, alongside consumer spending.
This, as the government bids to increase spending on infrastructure to as high as 7 percent by the end of the Duterte administration in 2022, from about 3 percent in the past.
Ante said the government spent about PHP800 billion on infrastructure spending in 2018 but this is targeted to be more than PHP1.8 trillion annually, excluding official development assistance (ODA) loans, by 2022.
He said increased infrastructure spending can boost consumption in relation to the gross domestic product (GDP) since the latter accounts for about 70 percent of domestic output.
Last year, GDP disappointed because government did not spend. But this year, we think all the unspent budget last year will be spent this year. At the same time, the new budget will be also spent so imagine the growth will be boosted. So, we expect GDP to grow 6.3 percent, he said.
The government is scheduled to announce the 2019 full-year growth on Thursday, and some economists forecast this to be higher than the 6.2 percent in the third quarter last year.
GDP slowed to 5.6 percent and 5.5 percent in the first two quarters last year from 6.3 percent in the last quarter of 2018.
Authorities attributed this to the impact of the delay in the approval of last year's national budget, which was only signed into law on April 15, 2019.
However, growth recovered in the third quarter after the government implemented a catch-up infrastructure spending program.
Average growth in the first three quarters last year stood at 5.8 percent, lower than the government's 6-6.5 percent target band.
Ante said that while domestic growth is seen to strengthen this year, the local currency is projected to take a hit since importation is expected to regain its upward trajectory.
Last year, imports posted slower growth due also to the impact of the budget approval delay, which hampered the government to spend according to its program.
The peso is seen to depreciate to about 51.50 to 52.00 to a US this year.
It has been depreciating for several days now as volatility rises because of geopolitical issues overseas, among others.
On Tuesday, it ended the trade at 51.015 against the greenback.
Ante said the local currency continues to enjoy the backing of the country's gross international reserves (GIR), which the Bangko Sentral ng Pilipinas (BSP) said hit an all-time high of USD88 billion at the end of 2019.
He said the BSP will ensure the stability of the local currency thus, there is no need to worry about it depreciating to alarming level.
Monetary officials have said that although foreign exchange in the country is market-driven, the BSP joins the market to address extreme volatility.
Ante further said because the central bank remains to have policy space as domestic inflation rate is seen to remain within the government's 2-4 percent target band, the BSP has the option to cut key policy rates by as much as 50 basis points this year.
Last year, the policy-making Monetary Board (MB) slashed the BSP's key rates by a total of 75 basis points as inflation sustained its drop.
After peaking at 6.7 percent in 2018 because of supply-side factors, inflation slowed to 0.8 percent last year.
The BSP also reduced banks' reserve requirement ratio (RRR) by as much as 400 basis points last year.
Ante forecast additional 200 basis points easing in RRR this year.
So that's additional liquidity to the system most importantly for growth, he added.
Source: Philippines News Agency