FMIC cuts 2019 economic growth forecast to 6-6.5%
Credit to Author: ANNA LEAH E. GONZALES| Date: Mon, 08 Jul 2019 16:22:34 +0000
FIRST Metro Investment Corp. (FMIC) on Monday revised downward its economic growth projection for the country this year to 6-6.5 percent from the 6.8-7.2 percent it estimated earlier.
It also sees the Bangko Sentral ng Pilipinas further reducing banks’ reserve requirement ratio (RRR) by 2 percent, as well as policy rates by 50 basis points, before 2019 ends on the back of easing inflation.
At the Ty-led investment bank’s midyear briefing in Bonifacio Global City, Taguig City, FMIC President Rabboni Francis Arjonillo said the delayed approval of the 2019 national budget was the “biggest factor” for the lowered projection.
The budget’s approval was delayed for the first four-and-a-half months of the year on account of a dispute between the Senate and the House of Representatives over insertions that President Rodrigo Duterte ultimately vetoed.
Despite the revised forecast, Arjonillo said FMIC continued to have a “positive outlook” on the Philippine economy, as government spending was expected to catch up in the coming months.
“After a slower-than-expected growth in the first quarter of the year, we expect the rest of 2019 to be better,” he added.
The country’s gross domestic product (GDP) hit a four-year low of 5.6 percent in January to March, which was blamed on the delayed budget approval.
“The catch-up plan of the government to bring infrastructure spending to 5.2 percent of GDP is very encouraging and would strongly support our growth expectation,” Arjonillo said.
For the second half, the FMIC chief said the bank projected economic growth to settle between 6.5 and 7 percent.
Growth drivers include robust domestic demand, solid investment spending and tourism, he added.
Data from FMIC showed that tourist arrivals in the first four months of the year reached 2.87 million. That figure is expected to grow to 8.2 million by yearend.
“Another positve sign is the rapidly decelerating inflation, which will provide the stimulus for consumer spending,” Arjonillo said.
The rate of the increase in the prices of goods and services decelerated to 2.7 percent last month from 3.2 percent in May — the lowest since August 2017’s 2.6 percent, the Philippine Statistics Authority reported last Friday.
FMIC projects inflation to fall and settle within the 2.7-3 percent range by yearend from 5.2 percent in 2018 on the back of lower crude oil and food prices.
Easing consumer price growth would allow the central bank to slash its RRR and policy rates, which Arjonillo said “are aimed at stimulating growth to propel the economy forward, to cheapen the cost of money, encourage borrowings, spur consumption spending and secure the ability of the people to pay for loans and debts.”
Meanwhile, FMIC said cash remittances from overseas Filipino workers will grow by 2-4 percent this year; exports, 2-6 percent; and imports, 10-14 percent.
The Philippine peso “will remain under pressure for the rest of the year and is estimated to trade at P52 to P53 to a dollar,” it added.
“It will depreciate slightly due to the BSP’s reduction in RRR and measures to rebuild its gross international reserves,” the bank said.
The post FMIC cuts 2019 economic growth forecast to 6-6.5% appeared first on The Manila Times Online.