PH growth to resume in 2019: ADB

The Bank’s revised outlook for the Philippines –from 6.8 percent in 2018 and 6.9 percent in 2019– “reflects a moderation in agricultural output and exports, as well as higher inflation and continued global monetary tightening.” (Photo: Asian Development Bank – ADB/Facebook)

MANILA — The Asian Development Bank (ADB) expects Philippine economic growth to pick up next year amid the tapering off of inflationary pressures and the government’s infrastructure push.

In an update of its flagship annual economic publication, Asian Development Outlook (ADO), the ADB on Wednesday said the Philippine economy can accelerate to 6.7 percent in 2019 after growing 6.4 percent this year.

The Bank’s revised outlook for the Philippines –from 6.8 percent in 2018 and 6.9 percent in 2019– “reflects a moderation in agricultural output and exports, as well as higher inflation and continued global monetary tightening.”

In a press briefing, ADB Country Director for the Philippines Kelly Bird said he considers the 6.4-percent still a “very robust” economic growth rate for this year amid the country’s strong economic fundamentals.

“It’s in line with the Philippine long-term growth seen in the last several years driven by private investment. We also believe that prediction for next year is around 6.7 percent again, that will be driven by investment. And we expect that to further pick up because a lot of the flagship projects under the government Build, Build, Build program will start to come on stream next year,” he said.

Bird said the country’s inflation rate is also expected to start moving towards the Bangko Sentral ng Pilipinas’ target range of 2 to 4 percent next year, as policy measures take effect.

The multilateral development bank stressed that “as monetary tightening begins to kick in, inflation will likely moderate in 2019 to 4 percent, the forecast revised up marginally from 3.9 percent.”

“The removal of administrative constraints and non-tariff barriers on food imports and implementation of productivity enhancement programs for agriculture should help stem supply side constraints on rice over time,” the ADB said in its ADO.

Headline inflation rose to average 4.8 percent in the first eight months of 2018, which the Bank attributed to supply-side factors such as poor crop production, higher international oil prices and peso depreciation.

Bird thus cited ADB’s analysis showing that the excise taxes on automobiles, petroleum products, sugar-sweetened beverages and tobacco under the Duterte administration’s first package of the comprehensive tax reform program, the Tax Reform for Acceleration and Inclusion (TRAIN), have a “relatively minor impact” on the consumer price index (CPI).

The CPI, most widely used in the calculation of the inflation rate and purchasing power of the peso, is an indicator of the change in the average retail prices of a fixed basket of goods and services commonly purchased by households relative to a base year.

“So it (TRAIN) is not the cause of the surge in inflation in the past few months. If you look at it, it’s food price inflation that is across-the-board. It really does tell me that the inflation is because of issues on the supply side also, oil price is now above USD80 (per barrel),” he explained.

Bird stressed that the Philippine government has taken “very proactive” measures vital in addressing inflation in the country.

He said the BSP lifted the policy rate by 100 basis points to slow down credit growth, while the government also removed administrative restrictions on imports of food items and other commodities.

“What the government has been doing in response to inflation are the right policies. They are not imposing price controls rather they are removing those restrictions to allow for a more efficient trade policy,” he added.

Bird further cited the country’s Unconditional Cash Transfer (UCT) program that provides compensation to poor households for some of the price increases in food.