Initial Economic Data Encouraging
As we predicted last year, consumer prices became tamer at the start of 2019, as the Duterte administration showed its resolve to manage the price situation.
Data from the Philippine Statistics Authority show that the inflation rate, which gauges the movement in prices, eased to 4.4 percent in January 2019, the slowest in 10 months. It gradually declined from a nine-year peak of 6.7 percent in October 2018, 6.0 percent in November and 5.1 percent in December.
I share the optimism of the government’s economic managers who said the latest inflation figure “gives us an auspicious start in our efforts this year to keep inflation manageable and bring it back to the government’s target range of 2 percent to 4 percent for 2019.”
With slower inflation, we can expect a much stronger economy. It provides households with greater spending power and encourages more businesses to invest because it means a more predictable and stable economic environment.
The Monetary Board of the Bangko Sentral ng Pilipinas, in its latest meeting on February 7, 2019, kept the overnight borrowing rate unchanged at 4.75 percent, based on its assessment of a more manageable inflation environment. It said inflation is expected to settle within the target range of 2-4 percent for 2019 and 2020, as price pressures continue to recede amid the decline in international crude oil prices and the normalization of supply conditions for key food items.
Such a statement, for me, is an assurance that we will have a predictable business environment within the next couple of years.
It is amazing to see the resilience of the Philippine economy, as it quickly rebounded from what seemed to be temporary imbalances in 2018. Despite the challenges in 2018, the gross domestic product actually grew 6.2 percent, still making the Philippines one of the fastest-growing economies in Asia.
Budget Secretary Benjamin E. Diokno, himself a noted economist, said in a speech before the European Chamber of Commerce of the Philippines: “In the medium term, the Philippines will remain to be one of the fastest-growing economies in the fastest-growing region the ASEAN region—in the world.”
Secretary Diokno is confident that in the next four years, the economy will grow at 7 to 8 percent annually, supported by key structural reforms and expansionary fiscal programs.
I am also optimistic about 2019, as the speculative fever dissipated this year. Aside from the slower inflation rate, other sources of optimism are the more stable exchange rate, with the peso now steady at 52 against the US dollar, the resolution of the rice supply crisis, the decline in world crude prices, the recovery of the stock market and the robust financial system.
As the peso stabilized, the gross international reserves climbed to $82.1 billion as of January 2019, the highest in 20 months. At this level, the reserves can cover more than seven months of import payments, above the international benchmark of three months.
Meanwhile, the PSEi, the 30-company benchmark index of the Philippine Stock Exchange, jumped 7.3 percent in January 2019, making the local bourse among the biggest gainers in Asia during the period.
The Board of Investments, the biggest incentive-giving body, said it approved P97.9 billion worth of investment commitments in January 2019, an impressive 91-percent increase from P51.3-billion registered in the same month last year. Trade Secretary and BOI Chairman Ramon M. Lopez said the figure “augurs well for the rest of the year as we aim to cross the uncharted trillion-peso mark in investment approval for the whole year.”
Filipino consumers are also ready to spend more this year. Automotive companies expect sales to rebound 10 percent in 2019, following a 16-percent slump in 2018, which was partly due to the initial implementation of the Tax Reform for Acceleration and Inclusion law.
On the political front, President Duterte has become more popular than ever. The president was named the most trusted government official in the survey conducted by Pulse Asia in December 2018, with an approval rating of 81 percent and a trust rating of 76 percent.
The initial statistics at the start of 2019 are positive, despite the challenges in the global economy. We must discard negative and speculative thoughts to encourage more investments in the country, contribute to economic growth and achieve what our economic managers describe as “Asia’s next success story.”