Manila Office 1H/2019

The Philippines continues to show strength after a challenging 2018. As inflationary pressures wane, the Bangko Sentral ng Pilipinas (BSP) now has a window to lower interest rates. Although GDP slowed down to 6.2% last year, the country remains one of the fastest-growing economies in Asia.

Household consumption has consistently provided the largest boost to economic growth, however, we’re seeing a growing contribution from government spending and investments as the structure of the economy shifts to investment-driven growth. Gross capital formation increased to 13.9% year-on-year (YoY) in 2018. With the country’s ‘Build, Build, Build’ program well underway, investment could accelerate further in 2019 and contribute more to GDP growth.

The government aims to increase infrastructure outlay from 4.7% of GDP in 2019 to 7.0% in 2022. Infrastructure spending reached PHP803.6 billion in 2018, up 41.3% YoY, in line with the government’s target and equivalent to 5.1% of GDP. Meanwhile, foreign direct investment registered a solid US$9.8 billion in 2018, albeit lower than 2017’s figure. Economic managers believe that the slowdown stemmed from uncertainties about global economic conditions. However, the slump is seen as temporary since the Philippines is working on implementing reforms that should improve the overall investment environment. In 2018, foreign investors injected US$2.3 billion of fresh capital in to the economy, focusing mainly on manufacturing, real estate and financial activities.