Economist: Growth could be stumped by headwinds

By: Daxim L. Lucas, Philippine Daily Inquirer, 18 Oct 2019

The Philippine economy remains strong, but may grow below 6 percent next year if current growth dampers will persist, according to the lead economist of the Bank of the Philippine Islands.

In a press briefing, Emilio Neri Jr. said stronger-than-anticipated global headwinds would likely be experienced in 2020, compounded by a noticeable slowdown in the country’s exports to China and the United States.

“Our external advisers tell us that the US and China growth deceleration in 2020 may even be more severe due to both cyclical and protectionist factors,” he said, adding that a more alarming phenomenon is that exports to Europe and the Asean have been declining year-on-year through August.

“The import item components that are collapsing (capital goods and raw materials) may be a signal that weakness can be expected to persist in the coming quarters,” he said. “Declines in the import of inputs for production can mean less production going forward.”

The BPI economist added the aggressive front-loaded borrowings of the Bureau of the Treasury—parked idly at the central bank from January to July this year—have caused “a massive domestic liquidity squeeze” which might have negated the 2-percentage point reduction in the reserve requirement ratio. The “anemic” growth of money supply through August 2019 despite all the easing actions of the BSP since May seemed to support this view, he said.

Meanwhile, the country is also experiencing a slowdown in manufacturing due to the plunge in the farm gate prices of rice and pork.

“We cannot shrug off the potential drag resulting from income losses of farmer due to the collapse in the farm gate price of rice and the impact of the discovery of African Swine Fever in the livestock sector,” he said.

The economy is also seeing slower demand for loans among Philippine corporates in anticipation of lower interest rates.