Angelo Taningco
Economist, Treasury Group
The Philippine economy expanded at a more moderate pace in Q4 and full-year 2017 amid higher inflation and a bigger trade deficit. This year, we expect it to gather steam on the back of stronger domestic absorption—household consumption, capital formation, government spending—buttressed by TRAIN’s income tax cuts and the government’s “Build, Build, Build” program. A more vibrant global economic environment will likewise support the country’s net export performance. Against this backdrop, we maintain our 6.8% GDP growth forecast for the year.
On a quarterly basis, GDP growth decelerated to 6.6% yoy in Q4 from 7.0% in Q3. The Q4 figure is below the market’s median forecast of 6.7% and higher than our 6.5% projection. The growth slowdown on the demand side was mainly due to the net exports’ growth contribution reverting to a negative level that was partly offset by the combined increases in the growth contributions of household consumption, capital formation, and government spending. On the production side, the decline in the growth contribution of services sector was the sole culprit in dragging GDP growth in Q4.
On an annual basis, GDP growth slowed down to 6.7% in 2017 from 6.9% in 2016, consistent with market expectations, amid a high base. We, however, expect this trend to reverse this year, foreseeing GDP to expand 6.8% on the back of TRAIN’s income tax cuts, government’s “Build, Build, Build” program, and a more vibrant global economy. Moreover, our medium- to long-term growth outlook remains positive in light of sustained fiscal stimulus and accommodative monetary policy as well as future economic reforms that will shift upward the growth trajectory of the country.
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