SINGAPORE. – Benjamin Diokno, governor of the Bangko Sentral ng Pilipinas (BSP), remained confident 2019 growth would reach 6 percent, the lower end of its 6 to 7 percent forecast, but acknowledged it might just miss the mark.
Diokno told Reuters third-quarter growth would likely be 6 to 6.4 percent and would accelerate further in the final quarter, offsetting some of the weakest growth rates seen in years during the first half.
“We are still confident we can get to 6 percent (in 2019)…but even if we hit 5.9 percent or 5.8 percent that is still one of the fastest (rates globally) given the slowing global economy,” Diokno said on the sidelines of a business conference here.
Diokno said the economy “hit a bump” in the first half due to a delay in budget approval and uncertainty over corporate tax changes, but that the outlook had improved.
The BSP has cut rates three times in 2019, most recently last month.
Asked about further easing, Diokno said: “We are easing because last year we tightened too much…so we still have a long way to go.”
He declined to say whether further easing would happen in 2019, saying it would depend on inflation rates which are currently “under control.”
Meanwhile, FMIC & UA&P Capital Markets Research in its Market Call publication said third quarter economic figures appear promising, with huge gain seen in employment amid the backdrop of an “unabated fall of inflation.”
The research firm pegged the quarter’s economic growth at 6 percent, with a chance to accelerate further to 6.5 percent in the fourth quarter given the employment uptick in July and the August inflation reported at 1.7 percent, “on track to go sub-1.5 percent by September.”
“The growth in total new jobs comes as a 3.5-year high, second highest in history,” it said.
It added optimism is further supported by signs of resurgence in national government spending to boost domestic demand starting in the third quarter.
“Besides, better-than-expected external demand would stimulate the economy as exports growth has remained in positive territory since April 2019,” it added.
The research expects yield in the 10-year and 91-day treasury will continue to fall “due to favorable domestic and external factors.”
“Externally, the downward pressure on yields may be seen not only in the US, but also in EU and Japan. Domestically, below-target inflation, BSP policy and RRR (reserve requirement ratio) cuts, and lower-than-expected borrowings by the National Government should provide the impetus,” it said.
“Thus, a fall of 10-year T-bond yields below 4.0 percent may be possible as financial markets tend to ‘overshoot’,” it added.
The report meanwhile noted a “depreciation bias for the peso, considering the strength of the US, especially compared to its peers, and our lingering balance of trade deficits.”
“The latter has broken its upward trend but remains elevated. The need to build our dollar reserves remains an imperative considering that India lost some 20 percent of its large reserves after the outbreak of the world financial crisis,” it said.
It expects the Philippine Stock Exchange to trade between 7,780-8,050 “until more positive economic and corporate developments emerge.”
“Corporate earnings should fall mostly in line with expectations, but the pullout threat of POGO (Philippine offshore gaming operators) could dampen market sentiment. However, BSP cuts in policy rate and reserve requirement could provide the needed stimulus,” the report said. (Reuters, R. Castro)