Good, not great
Local moods have soured over the past several months on strong external headwinds, i.e., the triple whammy of US monetary tightening, surging oil prices and an escalating US-China trade war, and a collection of weaker economic data, including lower GDP growth and higher inflation. Economic performance to date suggests that despite robust domestic demand, overall output has been pulled down by strong net imports, a reflection of domestic capacity constraints including the many chokepoints due to overstretched infrastructure facilities. Export growth, meanwhile, has been more sluggish, including BPOs. All things considered, the Philippine growth outlook is still a good one, with growth expected to remain above 6% in the next 12 months, among the highest in the region. We are closely watching the rice “tarrification” bill in congress as it has the potential to reduce inflation significantly sooner. The state visit of President Xi Jinping this week may further boost already rising trade and investments ties with China as well as tourism receipts, all upsides to growth.
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