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Philippines Country Risk Report 20 2018

Philippines Country Risk Report 20 2018

The Philippine economy grew 6.7% in 2017, which was in line with our estimate, and we forecast real GDP growth to moderate to 6.3% in 2018 given the deterioration in the business environment. How-ever, we note this is still a respectable growth figure, which will be supported by positive demographics, the strong public infrastructure drive and increasing trade links with China.

The BSP held interest rates steady at its March meeting, but we believe that policymakers will be increasingly compelled to tighten monetary policy in the coming months. Inflation is on a firm uptrend, growth has been resilient and the Philippine peso has been slumping.

We therefore continue to forecast the BSP to hike its policy rate by 50bps to 3.50% by end-2018.

The DOF has submitted the second tax reform package to the House of Representatives and the bill is now in deliberation. While the proposed tax reforms may be fiscally prudent, it will likely make the Philippines less competitive versus its regional peers. Investment could slow over the near-term as the proposed conditional corporate tax reduction and repealing of fiscal incentives create uncertainties for businesses.


Executive Summary
Core Views
Key Risks
Chapter 1: Economic Outlook
SWOT Analysis
BMI Economic Risk Index
Economic Growth Outlook
Growth To Moderate, But Remains A Regional Outperformer
GDP By Expenditure Outlook
TABLE: ECONOMIC ACTIVITY
TABLE: PRIVATE CONSUMPTION FORECASTS
TABLE: GOVERNMENT CONSUMPTION FORECASTS
TABLE: FIXED INVESTMENT FORECASTS
TABLE: NET EXPORTS FORECASTS
Outlook On External Position
TABLE: CAPITAL & FINANCIAL ACCOUNT BALANCE
TABLE: CURRENT ACCOUNT BALANCE FORECASTS
TABLE: MAIN IMPORT AND EXPORT PARTNERS
Monetary Policy
Rate Hikes Imminent As Inflation Risks Heighten
TABLE: MAIN IMPORTS AND EXPORTS
Monetary Policy Framework
TABLE: MONETARY POLICY FORECASTS
Fiscal Policy And Public Debt Outlook
TRAIN 2 A Net Negative For Investment
Structural Fiscal Position
TABLE: FISCAL AND PUBLIC DEBT FORECASTS
TABLE: MAIN REVENUE AND EXPENDITURE CATEGORIES
Currency Forecast
PHP: Down, But Not Out
TABLE: CURRENCY FORECAST
Chapter 2: 10-Year Forecast
The Philippine Economy To 2027
Potential For Higher Investment Rate To Sustain Economic Growth
TABLE: LONG-TERM MACROECONOMIC FORECASTS
Chapter 3: Political Outlook
SWOT Analysis
BMI Political Risk Index
Domestic Politics
Security Risks To Remain Elevated Amid Renewed Terror Threat
TABLE: POLITICAL OVERVIEW
Long-Term Political Outlook
Stable Politics For Now, But Political Challenges Remain
Chapter 4: Operational Risk
Operational Risk
TABLE: OPERATIONAL RISK
Business Crime
TABLE: BUSINESS RESPONSE TO WHITE COLLAR CRIME AND ORGANISED CRIME RISKS
Education
Chapter 5: BMI Global Macro Outlook
Trade Tensions Take Centre Stage
TABLE: GLOBAL MACROECONOMIC FORECASTS
TABLE: DEVELOPED STATES – REAL GDP GROWTH, % y-o-y
TABLE: EMERGING MARKETS – REAL GDP GROWTH, % y-o-y
TABLE: PHILIPPINES – MACROECONOMIC DATA & FORECASTS

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