Market Research Logo

Philippines Country Risk Report Q1 2019

Philippines Country Risk Report Q1 2019

We have revised our 2018 real GDP growth forecast for the Philippines down to 6 3%, from 6 5% previously, to take into account the sub-par economic perfor-mance in H118, and also our expectations for growth headwinds from tightening monetary conditions and deepening trade tensions globally to persist in the coming quarters

The upcoming May 2019 mid-term elections in the Philippines could see the Senate fill up with allies of President Duterte, given that the opposition Liberal Party has been weakened considerably This would facilitate Duterte's plan to move the country towards federalism Duterte's consolidation of power would be positive for the policymaking process, but is likely to weigh on the system of checks and balances

We expect the BSP to hike its policy interest rate again by 25bps to 4 75% before the end of 2018 and by 75bps to 5 50% in 2019 Inflation is likely to remain broad-based and elevated, given higher oil prices, sustained high credit growth and a weaker currency The Philippine peso remains vulnerable due to its nega-tive real interest rate differentials versus the US

The Philippine Congress passed the second package of President Duterte's flagship tax reform programme, known as TRABAHO, on September 10 We believe that the impact on the government's fiscal position will be negligible and maintain our forecast for the deficit as a share of GDP to come in at 2 9% in 2018, and average 2 6% over the coming decade The proposal to lower corporate income tax rates is unlikely to result in a tangible boost to investment without an improvement to the business environment

The Philippine peso is looking technically bearish in the near term, and we believe that fears of contagion from other EMs and rising US interest rates will weigh on the currency further, despite the central bank's policy actions Over the longer term, higher inflation and rising twin deficits will also act as a drag on the peso, which will likely offset the support from remittances

Key Risks

Political infighting could cause policy gridlock, while Duterte's unpredictable temperament could upset existing trade relations with major economic partners such as the US and the EU

The business environment appears to be deteriorating as the Duterte administration focuses more on the war on drugs and domestic security threats

Philippines is increasing economic linkages and exposure to China (and moving away from the West), at a time when the US and China are experiencing rising trade tensions With the Chinese yuan on a weakening trajectory, Beijing could tighten capital controls, leading to a drying up of external financing from China


Executive Summary
Core Views
Key Risks
Country Risk Summary
Economic Risk Index
Political Risk Index
SWOT
Economic – SWOT Analysis
Political – SWOT Analysis
Economic Outlook
Economic Growth Outlook
Philippines Will Struggle To Recover Growth Momentum
GDP By Expenditure Outlook
TABLE: GDP GROWTH FORECASTS
TABLE: PRIVATE CONSUMPTION FORECASTS
TABLE: GOVERNMENT CONSUMPTION FORECASTS
TABLE: FIXED INVESTMENT FORECASTS
TABLE: NET EXPORTS FORECASTS
Outlook On External Position
TABLE: CURRENT ACCOUNT BALANCE FORECASTS
TABLE: CAPITAL AND FINANCIAL ACCOUNT BALANCE
TABLE: MAIN IMPORT AND EXPORT PARTNERS
TABLE: MAIN IMPORTS AND EXPORTS
Monetary Policy
Rate Hiking Cycle In Philippines Has Further To Go
Monetary Policy Framework
TABLE: MONETARY POLICY FORECASTS
Fiscal Policy And Public Debt Outlook
Philippines' Second Tax Reform Package To Yield Little Results
Structural Fiscal Position
TABLE: FISCAL AND PUBLIC DEBT FORECASTS
TABLE: MAIN REVENUE AND EXPENDITURE CATEGORIES
Currency Forecast
Philippine Peso Weakness To Continue But At A More Gradual Pace
TABLE: CURRENCY FORECAST
Philippines Country Risk Q1 2019THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS MACRO RESEARCH and is NOT a comment on Fitch Ratings’ Credit Rating. Any comments or data included in the report are solely derived from Fitch Solutions Macro Research and independent sources. Fitch Ratings’ analysts do not share data or information with Fitch Solutions Macro Research.Contents10-Year Forecast
The Philippine Economy To 2027.
Potential For Higher Investment Rate To Sustain Economic Growth
TABLE: LONG-TERM MACROECONOMIC FORECASTS
Political Outlook
Domestic Politics
Philippine 2019 Mid-Term Elections Could Boost Policymaking, But Not Without Drawbacks
TABLE: POLITICAL OVERVIEW
TABLE: SENATE SEATS BREAKDOWN
Long-Term Political Outlook
Prospects For Improving Governance
Operational Risk
TABLE: OPERATIONAL RISK SCORE
Economic Openness
TABLE: TARIFF AND NON-TARIFF TRADE BARRIERS
TABLE: FREE TRADE AGREEMENTS
TABLE: FREE TRADE ZONES AND INVESTMENT INCENTIVES
TABLE: BARRIERS TO FDI
Utilities Network
TABLE: ELECTRICITY RISKS
TABLE: FUEL RISKS
TABLE: TELECOMMUNICATIONS RISKS
TABLE: WATER RISKS
Global Macro Outlook
Contagion Risks Limited To EMs For Now
TABLE: GLOBAL MACROECONOMIC FORECASTS
TABLE: DEVELOPED STATES, REAL GDP GROWTH, % y-o-y
TABLE: EMERGING MARKETS, REAL GDP GROWTH, % y-o-y
Index Tables
TABLE: PHILIPPINES – MACROECONOMIC DATA AND FORECASTS

Download our eBook: How to Succeed Using Market Research

Learn how to effectively navigate the market research process to help guide your organization on the journey to success.

Download eBook

Share this report