Bangko Sentral ng Pilipinas Deputy Governor Diwa Guinigundo said the government’s economic growth target range of 7 percent to 8 percent for 2019 is doable on the back of higher public spending and household expenditures.
Guinigundo said in an interview if the economy managed to grow 6.2 percent in 2018 in the middle of domestic and external headwinds, the economy could grow faster this year, especially as inflation was expected to decelerate in the coming months.
“If we are able to grow by the average of 6.2 percent in 2018 when we faced so many challenges, including a 5.2-percent inflation driven by high oil prices and issues about supply and logistics of key commodities and services, I think 2019 will be a better year,” Guinigundo said.
“Inflation is expected at 3.2 percent for 2019 and 3 percent for 2020. If that’s the case, we expect consumption expenditure to improve better than in 2018,” he said.
Guinigundo said a slower inflation rate would result in more significant improvements in consumption expenditure.
He said with slower inflation, investments would be better in terms of its contribution to total economic growth.
“To be able to maximize the demographic dividends, cash transfers and free tuition fee should be sustained. That means more public spending, and more public spending can translate to higher growth,” he said.
Guinigundo said he was expecting exports to recover even with the less optimistic global growth.
“I would rather stick to the government’s target of 7 to 8 percent GDP growth this year,” he said.
The economy grew 6.2 percent in 2018, slower than 6.7 percent in 2017, pulled down by high inflation rate and sluggish turnout in agricultural output.
The GDP growth last year missed the official target range of 6.5 percent to 6.9 percent, which was announced by the interagency Development Budget Coordinating Committee in November 2018.
The DBCC kept the previous forecast of 7 percent to 8 percent GDP growth, as election spending is expected to boost the economy while slower inflation is seen to result in domestic consumption.
British bank Standard Chartered said it expected the Philippine economy to grow 6.4 percent this year, slightly faster than 6.2 percent in 2018, driven by domestic consumption.
“We see that consumption will be the main driver of economic growth this year. Infrastructure spending will continue to be strong particularly in the second half,” Standard Chartered economist for Asia Chidu Narayanan said in a briefing in Makati City.