MANILA -- First Metro Investments Corporation (FMIC) officials remain bullish about the Philippine economy despite rising inflation, keeping its 2018 growth projection between 7 to 7.5 percent. This optimism is reportedly due to expectations of strong domestic demand, government infrastructure spending and energetic investment expansion.
In a briefing Monday, FMIC President Rabboni Francis Arjonillo said domestic demand will continue to be resilient backed by sustained robustness of investments, inflows from Overseas Filipino Workers (OFWs) and the Duterte administration’s infrastructure program, which in turn, provides job opportunities for more Filipinos.
Other factors are the improvement of the manufacturing sector, sustained rise of tourism arrivals and the continued enhancement of the fiscal and monetary policy.
FMIC forecasts inflows from Filipino workers abroad to hit the government’s 2 to 4 percent target, and infrastructure spending to account for 5.4 percent of gross domestic product (GDP).
Exports growth is seen between 6 to 10 percent and imports to post higher expansion of between 10 to 14 percent on increased demand in the domestic economy.
“We remain optimistic that the Philippine economy will continue to grow at a fast pace and we have every reason to believe this,” he said.
A report by the Bangko Sentral ng Pilipinas (BSP) Monday showed that cash remittances grew by 4.2 percent at the end of the first five months this year to USD11.82 billion.
Including value of in-kind remittances, total remittances went up by 4.4 percent year-on-year in end-May this year to USD13.17 billion.
Monetary officials said a 2 to 4 percent remittance growth at this time is a normal level, now even after rising to over 10 percent in the past years since remittance inflows are maturing.
University of Asia and the Pacific (UA&P) economist Dr. Bernardo Villegas, during the same briefing, said the government should give extra focus on the agribusiness sector as this provide significant boost to the domestic economy.
He said Asia is seen to dominate global growth and another plus for the Philippines is the economic rebalancing wherein greater trade among Asian neighbors are happening.
“If we continue to base our growth more and more on our domestic market then that is another advantage that we have,” he said.
Meanwhile, Villegas forecasts additional 50 basis points hike in the BSP rates in the remaining months of the year and another 25 basis points increase in 2019 after the total of 50 basis points last May and June.
BSP officials have drawn flak after cutting banks’ reserve requirement ratio (RRR) by a total of 2 percentage points, at 1 percentage point each last March and June, as part of its financial market reform agenda amid hiking policy rates, at 25 basis points each last May and June.
To date, banks’ RRR is 18 percent while BSP’s reverse repurchase (RRP) facility rate is now at 3.50 percent.
A cut in RRR means the central bank is allowing more liquidity to flow into the economy, which is needed by the sustained domestic growth.
Meanwhile, the increase in the BSP’s key rates was made to prevent any second round effects from the rising domestic inflation rate. It is, however, seen to make people take in more loans.
Villegas said BSP continues to be manned by professional staff and he is “convinced that they can correct their errors (and) they can be ahead of the curve in the next six to eight months.”
Another UA&P economist, Dr. Victor Abola, during the same briefing, said he also forecasts 50 basis point increase in the BSP rates in the remaining months of 2018 on account of rising inflation rate.
Rate of price increases rose to 5.2 percent last June from the previous month’s 4.6 percent. Average inflation rate in the first half this year stood at 4.3 percent, higher than the government’s 2 to 4 percent program for the year.
Abola forecasts inflation to peak at 4.7 percent in August and to gradually go down in the following months.
“It may not go down rapidly unless rice prices really go down,” he added. (PNA)
