Philippines seen expanding above 6% in Q419 and 2020 – UOB

In light of the recent better-than-expected GDP figures, the growth prospects for the Philippines in the next months look solid and above the 6.0%, noted UOB Group’s Julia Goh, Senior Economist, and Loke Siew Ting, Economist.

Key Quotes

“The Philippines’ real GDP growth rebounded to 6.2% y/y in 3Q19 (2Q19: +5.5% y/y), beating ours and market expectations of a 6.0% y/y gain. It was largely driven by a recovery in government’s infrastructure spending after the delayed passage of the national budget in 1H19, renewed consumer confidence with slower inflation and accommodative monetary policy, as well as higher overseas remittances during the quarter”.

“Despite lingering external headwinds clouding global growth prospects, we expect a sustained domestic economic growth of above 6.0% in 4Q19 and into 2020. Domestic factors that will help to boost domestic growth include a further pick-up in government expenditure on infrastructure program, sustained overseas remittances inflows, favourable labour market conditions, accommodative monetary policy, and manageable inflation expectations. We revise upward our full-year real GDP growth targets to 6.0% for 2019 (from 5.8%) and 6.5% for 2020 (from 6.2%)”.

“With 3Q19 GDP growth rebounding at a faster-than-anticipated pace and risks to the inflation outlook remaining contained, we believe BSP will keep its overnight reverse repo rate steady at 4.00% at next Thursday’s (14 Nov) monetary policy meeting. In mid-Oct and on 4 Nov, BSP Governor Benjamin Diokno has also said that “the central bank is done with easing monetary policy for this year”, which further supports our view of a rate pause next Thursday and its final meeting in Dec”.