Promoted Content

Consumers hold the key to Philippines growth in 2020

Domestic demand will be the key economic driver for growth in the Philippines 2020, on the back of increased government spending, relatively benign inflation and supportive monetary policies. However, the full effects of the coronavirus outbreak are yet to be calculated.

An unexpected inflationary uptick in January (2.9%), up 0.4% from December’s rate, may be its biggest jump in eight months but it remains within the government’s annual targeted range of 2-4%. Rising liquefied petroleum, transport and food prices plus higher taxes on alcohol and tobacco all contributed to the rise.

The Bangko Sentral ng Pilipinas (BSP) cut interest rates by 25 basis points on February 6, but the question is whether this upward inflationary move will push the central bank to consider cutting rates again, and by how much. The latest cut is the fourth since the central bank began loosening monetary policy in 2018.

Still, the Philippines economy is likely to power its way through the year, growing faster in 2020 than it did in 2019, despite a global slowdown.

Optimism is high after the nation ended the last quarter of 2019 strongly, when compared with other major regional economies which saw the Philippines second only to Vietnam and ahead of China in gross domestic product (GDP) percentage growth. The peso is sitting around P50 to the dollar but may weaken to P53 by the end of 2020 as the government ramps up infrastructure spending and create a higher trade deficit.

First Metro Corporation (First Metro), the investment banking arm of the Metrobank Group, says consumer confidence is a key economic driver, with growth fueled by stronger spending and easing monetary conditions.

“Consumer spending, which accounts for 66% of the country’s GDP, will expand further, driven by robust government and infrastructure spending, a higher employment rate, manageable inflation, and robust overseas Filipino workers remittances,” First Metro president Rabboni Francis Arjonillo said.

Adding to consumer confidence are rising overseas remittances, which grew by 4.2% to $27.2 billion and looks set to maintain an annual growth rate of between 2-4%.


Arjonillo said several risk factors will affect movements in interest rates, most notably "geo-political factors.” He predicted the 10-year benchmark bond will trade between 4.375% and 5%.   

A combination of low interest rates and low inflation, together with robust macro economic fundamentals is likely to see corporate earnings grow by at least 10%, according to Arjonillo. These factors plus renewed debt financing opportunities from corporates and banks are set to boost the local debt capital market. Equity capital market could also gain momentum as corporate earnings rise.

Arjonillo believes market developments such as the emergence of REITs, the introduction of short selling, and the implementation of the proposed 25% increase in the minimum public float would spur trading activity in the stock market.


After protracted negotiations and months of uncertainty the China-US trade deal has finally moved forward; one of the region’s key geo-political risks is now partly mitigated.

But with China now battling the massive coronavirus outbreak that has spread worldwide, and the run up to the November US presidential elections underway, an actual date for when this agreement will be implemented and whether China’s purchasing targets will be met, remains unknown.

Tourism is also likely to be disrupted by the spread of the virus. The Department of Tourism has estimated the impact to stand at P42.9 billion ($848.6 million) of revenue loss from Feb-April Mainland tourists accounted for the second largest visitor numbers to the Philippines. Foreign tourist numbers grew 15% (January-October 2019), from 5.9 million to 6.8 million visitors. Koreans and Chinese tourists accounted for 23% and 22%, respectively, of total tourist arrivals.

Another unanticipated event that may affect tourism occurred on January 12, when one of Manila’s key tourist attractions – the Taal Volcano, unexpected erupted, disrupting both tourism and agriculture. Although dramatic at the time, the National Economic and Development Authority said its impact is unlikely to affect the nation’s growth expectations, a move that First Metro echoes.

¬ Haymarket Media Limited. All rights reserved.
Share our publication on social media
Share our publication on social media