MANILA, Philippines – The Philippine economy will grow more than six percent over the next two years as the new government embark on expansionary spending that will boost domestic demand, a Barcelona-based think tank said.
FocusEconomics sees the local economy, as measured by gross domestic product (GDP), growing 6.4 percent this year before slowing down to 6.1 percent in 2017.
The figures will be faster than last year’s 5.8 percent. The 2016 outlook falls within the government six- to seven-percent target, but that of 2017 is slightly below the 6.5- and 7.5-percent goal.
“Expansionary fiscal policy as well as solid domestic demand should drive another year of healthy growth in the economy,” the think tank said.
“The Philippine economy performed robustly in the first half of the year and economic activity was supported by strong domestic demand,” FocusEconomics said.
In making the forecast, the agency cited the double-digit growth in fixed capital investments during the first semester, when growth accelerated to 6.9 percent that capped the previous administration’s term.
Nevertheless, FocusEconomics said the first half performance could still very well indicate the government’s commitment to implementing economic reforms, especially under Duterte government that promised to boost spending.
From just 0.9 percent of GDP last year, the Duterte administration vowed to widen the budget deficit to three percent next year on the back of higher infrastructure spending.
The deficit cap for this year had also been widened to 2.7 percent of GDP from the original two percent.
Still, FocusEconomics said there is reason to believe the economy slowed in the second half in the absence of election spending, while private consumption held up with the help of remittances.
“Latest high-frequency indicators show that economic activity might have slowed in the third quarter. In July, growth in retail sale decelerated and remittances recorded the first contraction in four months,” it said.
Focus Economics economist Massimo Bassetti said private consumption is expected to grow by 6.4 percent this year and by 5.9 percent next year.
“Remittances, which accounted for approximately 9.8 percent of GDP in 2015, are an important source of income for many Filipino families and thus a main driver of private consumption,” Bassetti said.
Central bank data showed the amount of money sent home by Filipinos abroad grew three percent to $15.32 billion in the first seven months of the year from $14.87 billion in the same period last year.
This was lower than the four percent growth target set by the BSP due to the de-risking activities being undertaken by foreign banks as well as the impact of soft oil prices in the world market on the deployment of Filipino workers.