MANILA, Philippines – The Philippine economy is expected to remain strong this year despite external challenges as global growth continues to be uneven, Bangko Sentral ng Pilipinas Governor Amando Tetangco Jr. said yesterday.
“2015 will likely bring continued economic challenges for the Philippines. Nonetheless, the country appears to be well-placed to deal with these tests,” Tetangco said at a breakfast forum hosted by the Tuesday Club at the EDSA Shangri-La Hotel.
Accoriding to Tetangco, the domestic economy will have to cope with uneven global growth prospects as the US recovers while the euro area and Japan continue to struggle. China’s growth slowdown has also tempered prospects in emerging markets, adding to a more challenging economic global backdrop. Tetangco added.
“The Philippines’ underlying story of resilience has remained intact throughout a challenging 2014. Despite some moderation owing to slower agricultural production and lower public spending, economic growth remained robust, supported by a broadening production base and solid domestic demand,” Tetangco said.
Tetangco said inflation remained manageable last year, while the peso continued to be supported by strong inflows of remittances from Filipinos abroad, receipts from the business process outsourcing industry, and the current account surplus.
“These developments give us confidence that the Philippine economy will remain on firm footing in 2015,” Tetangco said.
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“In raising the country’s credit rating to one notch above the minimum investment-grade rating, Moody’s [Investors Service] cited the government’s ongoing efforts to reduce debt, improve fiscal management, and minimize vulnerability to external developments,” he said.
“This upgrade affirms our view that, with stronger macroeconomic fundamentals, the country will remain resilient to the potential waves of turbulence ahead, as the rebalancing of global growth prospects continues,” Tetangco added.
The Philippine economy slowed to a 5.3 percent in the third quarter, bringing the nine-month average to 5.8 percent. This is way below the government’s 6.5 to 7.5 percent target but Moody’s in December awarded the country a credit rating upgrade to Baa2 with a stable outlook.
For this year, the government hopes to grow the economy by seven to eight percent.
“Economic growth is seen to remain robust, given firm private demand on the back of continued inflows of overseas Filipinos’ remittances, a low inflation and interest rate environment, and positive market sentiment among household and firms,” Tetangco said.
But he warned “it remains critical that government ramp up spending to provide the vital infrastructure projects that will sustain economic growth in the medium term.”
An increase in spending will ensure this year’s target will be achieved, he said, adding the government has enough fiscal space due to recent years of “prudent” fiscal management.