Regional think tank downgrades growth outlook on Philippine economy amid inflation
MANILA, Philippines — The Philippines will likely miss its economic growth target this year and next, according to a regional think tank, which joined other institutions in slashing their growth outlook on the country as multi-year high inflation hurts Filipino consumers.
In its October economic outlook, ASEAN+3 Macroeconomic Research Office, or AMRO, cut its 2018 growth estimate for the Philippines to 6.5 percent from 6.5 percent previously.
For 2019, AMRO expects the Philippine economy to expand 6.4 percent.
If realized, the regional research group’s predictions would fall below the government’s 7-8 percent target range. It would also place the Philippines as the sixth-fastest growing economy in the 14-nation report.
The Philippines had enjoyed uninterrupted growth in the past quarters, thanks to benign inflation in the previous years that had given the central bank enough room to keep interest rates low.
But in the second quarter of 2018, the economy slowed down to a three-year low of 6 percent, which the government's chief economist attributed to “spoiler” inflation.
In the first half of the year, the economy grew 6.3 percent, well below the state’s goal.
Inflation surged to a fresh nine-year high of 6.7 percent in September after monster typhoon Ompong flattened vast swathes of farmland in northern Luzon last month, adding to the country’s food supply woes. Year-to-date, inflation average to 5 percent, well above the Bangko Sentral ng Pilipinas’ 2-4 percent target band.
Despite onslaught of "Ompong", farmgate price of palay dropped 0.91 percent in the fourth week of September from a week ago, resulting into a 0.07 percent decline in average retail price of regular milled rice during the same period, latest government data show. Rice is a staple food in the Philippines and a heavy item in the basket of goods and services that a Filipino purchases.
Higher-than-expected inflation
In the same monthly report, AMRO said it expects Philippine inflation to hit 5.2 percent this year — the highest among the rest of Asian economies covered — before cooling down to 4.3 percent in 2019.
“For the growth rate revision, the main reason is that inflation is higher than previously expected, and high inflation continued to erode the purchasing power of household and consumer confidence,” AMRO chief economist Hoe Ee Khor was quoted as saying in a report by BusinessWorld.
Socioeconomic Planning Secretary Ernesto Pernia earlier said the economy would have to expand by at least 7.7 percent in the second half to achieve the low-end of its target range for the year.
However, some analysts expect economic growth to continue to decelerate over the second semester of the year as tighter monetary policy and higher inflation weigh on consumer spending, which accounts for about seven-tenths of the Philippine economy.
The Asian Development Bank, the International Monetary Fund and the World Bank have recently downgraded their growth projections on the Philippines as high inflation bites.
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