PHL economy to grow below 6% in 2020 —BPI

Global and domestic headwinds are expected to put a drag hamper the country’s growth trajectory, and the economy may likely grow below 6%, Bank of the Philippine Islands (BPI) said Thursday.

“The economy may continue to grow below 6% again in 2020 if four factors will persist in 2020,” BPI lead economist Emilio Neri Jr. said in a media briefing in Makati City.

As of the first semester of 2019, the economy as measured by gross domestic product (GDP) slowed to 5.5%, compared with 6.3% in the same period last year.

The delayed passage of the 2019 national budget, which slowed down public spending on infrastructure and social services, was largely blamed from the economic results in January to June.

The GDP growth will likely grow by 5.9% this 2019, from 6.2% last year, the Ayala-led lender noted.

For 2020, BPI is forecasting the economy to grow by 6.4%.

“If the 2020 budget is approved on time and the Bangko Sentral ng Pilipinas continues with the rate cuts, then we can expect the Philippines to return to 6-7% growth path,” Neri said.

However, if the “four factors” continue to persist next year then “it will be a challenge for us to stay above 6%.”

The BPI chief economist said that the global economic slowdown would be “difficult for the country to go against.”

“There is a noticeable slowdown in exports to China and US. US and China growth deceleration in 2020 may even be more severe due to both cyclical and protectionist factors,” Neri said.

Another factor is the anemic growth in domestic liquidity or the amount of money circulating in the financial system which grew by 6.2% as of end-August.

This may be a result of by the aggressive borrowing by the Bureau of Treasury only to have the funds parked in the central bank’s vault.

Neri said the aggressive borrowings of the government, without recirculating the money in the financial system, has negated the 2-percentage-point reduction in the reserve requirement ratio of banks.

The plunge in farmgate prices of rice and pork brought about by rice trade liberalization and the African Swine Fever (ASF) could also dampen next year’s growth prospects.

“We cannot shrug off the potential drag resulting from income losses of farmers due to the collapse in the farmgate price of rice and the impact of the discovery of ASF in the livestock sector,” Neri said.

The fourth factor is the slower demand of corporate loans in anticipation of lower interest rates.

“Our large firm clients took on less long-term loans for long-term projects compared to previous years,” Neri said. —VDS, GMA News