MANILA, Philippines — Fitch Solutions Macro Research — a unit of Fitch Group — upwardly revised its growth outlook on the Philippine economy on expectations of stronger government spending.
Fitch Solutions said the economy will likely grow 6% in 2019, higher than its previous projection of 5.7% on the back of “a strong rebound in government expenditure and the continued reliance of household confidence.”
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“Philippines’ strong Q319 GDP growth print proved government stimulus to be stronger than we had anticipated previously and we continue to expect fiscal spending to lift growth in the final quarter,” it said.
The Philippine economy expanded 6.2% in the third quarter, faster than 5.5% pace recorded in the preceding three months.
Construction, which grew 16.3% in the July-September period, contributed the most to gross domestic product growth, National Statistician Dennis Mapa said.
According to Fitch Solutions, domestic confidence is expected to remain strong over the very near term as a result of the government’s stimulus, as well as low inflationary pressures.
However, the Fitch unit said risks “remain tilted to the downside” for the Philippine economy amid external headwinds — such as the US-China trade war — that fiscal and monetary stimulus alone cannot sufficiently address.
“As such, we maintain our growth forecast of 6.1% in 2020, at the lower bound of the government’s 6-7.0% target range,” Fitch Solutions said.
“The Philippines’ heavy reliance on external financing to support its infrastructure drive also leaves it vulnerable to a sudden deterioration in risk appetite or growth optimism amongst foreign investors,” it added. — Ian Nicolas Cigaral