Global information firm IHS Markit remains optimistic about the Philippine economy's direction for the remainder of the year but expects stronger growth in 2019 with the Duterte administration’s “Build, Build, Build” program as main driver.
IHS Markit APAC Chief Economist Rajiv Biswas, in a statement released Thursday, attributed the toned- down 6.1 percent GDP growth to the elevated inflation rate in recent months as well as the 150 basis points increase in Bangko Sentral ng Pilipinas’ (BSP) key rates.
An additional factor noted was the impact of Typhoon Ompong, which cost damages of about P35 billion.
In the first three quarters of the year, rate of price increases averaged 5 percent, with the September figure alone rising to 6.7 percent from month-ago’s 6.4 percent.
Inflation last October, in turn, was flat at 6.7 percent but the average in the first 10 months this year rose to 5.1 percent, rising further beyond government’s 2 to 4 percent target.
The elevated domestic inflation rate has been attributed primarily to faster inflation of the food index following the supply constraints on rice, fish, and vegetables.
Heightened inflation is the main reason for the hikes in the central bank’s key policy rates to address inflation expectations and ensure price stability
Biswas said these two factors “have acted as a drag on household consumption” for the third quarter this year.
“The impact of BSP rate hikes will continue to act as a drag on household consumption in coming quarters, with Q4 GDP growth likely to moderate to a pace of around 6.0 percent year on year,” he said.
“However, the Philippines economy is still forecast to grow at a robust pace of around 6.2 percent in 2019, underpinned strong construction sector growth, which will be boosted by the ramping up of infrastructure spending under the government’s ‘Build, Build, Build’ program,” he added.