Philippine Growth Slower Than Estimated as Investment Weakens

(Bloomberg) -- Philippine economic growth was slower than economists estimated last quarter, as expansion in investment and manufacturing weakened. The currency pared its gain.

Gross domestic product rose 6.1 percent in the fourth quarter from a year earlier, compared with the 6.3 percent median estimate in a Bloomberg survey. Growth was 6 percent in the previous three months. The economy expanded 6.2 percent in 2018, the weakest in three years.

Philippine Growth Slower Than Estimated as Investment Weakens

Key Insights

  • While expansion is slower compared to previous years, the economy is still among the fastest-growing in the world, joining the ranks of China and Vietnam in Asia.
  • The peso pared its gain and was little changed after the data,
    after rising as much as 0.2 percent earlier
  • Inflation, which soared above the central bank’s target last year, is expected to ease this year and that will support consumer spending as exports falter.
  • The central bank raised interest rates 175 basis points last year, among the most in Asia, to curb price-growth and support the currency.
  • Infrastructure has been a pillar of the economy as President Rodrigo Duterte boosts spending on roads and railways to a record.

Economists’ Views

  • “The slowing growth momentum leaves the door open for Bangko Sentral ng Pilipinas to reverse course and move to a more accommodative stance, first by slashing the reserve requirement ratio in the first quarter then policy rates in the second quarter,” said Nicholas Mapa, senior economist at ING Groep NV in Manila.
  • "Philippine growth outlook remains robust. Amidst rising risks on external demand, Philippines’ strong domestic demand will provide a significant cushion,” said Eugenia Victorino, head of Asia strategy at Skandinaviska Enskilda Banken AB.

What Our Economists Say...

The Philippine economy’s 4Q growth miss highlights the headwinds to the economy from the Bangko Sentral ng Pilipinas’ efforts to combat soaring inflation – which sent investment growth tumbling. That should keep the central bank on hold in the near term, though we aren’t ruling out the possibility of an additional rate hike later this year.

-- Justin Jimenez, Bloomberg Economics

Know More

  • The nation will hold midterm elections in May, where about 18,000 national and local posts, including half the 24 Senate seats will be contested.

©2019 Bloomberg L.P.