2018 GDP growth settles at 6.2%

2018 GDP growth settles at 6.2%

Economy

UnionBank Publication

UnionBank Publication

269 week ago — 4 min read

The GDP (Gross Domestic Product) of the last quarter of 2018 came in slower-than-expected at 6.1% (Market consensus at 6.3% and UnionBank-ERU at 6.4%). High prices have dampened overall demand as private and public consumption declined from 2017 to 2018 (as shown in the figure 1 below).

 

GDP Growth

 


Meanwhile, Inflation is expected to slow down to below 5.0% by the end of the first quarter of 2019, an average of 4.0% in the second quarter, 3.2% in the third quarter, and 2.9% in the last quarter.

 

Food and non-alcoholic beverages, the commodity group taking up more than a third (39.0%) of the measurement weight of the Consumer Price Index (CPI), and consequently, the biggest driver of inflation since January 2018, has started to ease in November 2018.

 

In addition, crude oil prices are expected to decline further, helping accelerate price level decline. Domestic demand is seen to recover in 2019. Barring any surprises from the level of global oil prices, inflation is expected to be 3.6% for 2019 and 3.5% in 2020.

 

On the other hand, capital formation, particularly construction and durable equipment, rose from 2017 to 2018. Construction, as an investment in both public and private, increased from 6.2% in 2017 to 14.6% in 2018. Likewise, durable equipment grew from 10.5% in 2017 to 14.5% in 2018.

 

Since 2019 is an election year, election spending and further capital formation are crucial for 2019 economic growth. An uptick in domestic consumption (of at least a greater than 6.0% level) is expected. 2016 consumption growth averaged at 7.2% and greater than 6.0% probable growth for domestic demand is modest enough. This is not to mention the parallel positive impact of easing price levels on general consumption which accounts for a large part of the Philippine economy.

 

Furthermore, the Duterte government's continued push for infrastructure spending can support construction growth in 2019.


Economic Forecasts

 

Disclaimer: While this document is based on information obtained from sources we believe to be reliable, we do not make any representations as to its accuracy, completeness, correctness, timeliness or use for any particular purpose. Opinions and statements expressed here are those of their author(s) as of the date of this report and not of Union Bank of the Philippines (UBP). The opinions and statements provided in this document are subject to change without prior notice. Any recommendation contained in this document does not have regard to the reader’s particular investment objectives, financial situation and any other specific needs. This document is for informational purposes only and UBP is not soliciting any action based on it. Nothing here shall to any extent substitute for the independent investigations and the technical and business judgment of the reader. Your use of this document and any of its contents is at your own risk and UBP does not accept any liability for the results of any action or decision taken on the basis of or reliance on this document or any of its contents.

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