Philippines Country Risk Report Q1 2020

Philippines Country Risk Report Q1 2020

We have revised down our economic growth forecast to 5.7% and 6.1% in 2019 and 2020 respectively, from 5.9% and 6.3% previously, owing to softer external demand and less fiscal stimulus.

We expect the Banko Sentral Ng Pilipinas to adopt a cautious approach over the coming months, keeping its key policy rate unchanged at 4.00% in 2019 and delivering a further 25bps rate cut in 2020 to 3.75%.

Key Risks

A shift away from the West and Duterte's more populist rhetoric could upset existing trade relations with major economic partners like the US and the EU.

The 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. A deterioration in US-China trade relations could weigh on demand across the Asia region and weaken Chinese investment into the Philippines.

Philippines' twin deficits leave it somewhat exposed to a sudden bout of risk-off sentiment, with inflation a risk were the peso to weaken significantly.


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 Q2 Growth Weakness Reinforces Slowdown View
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: MAIN IMPORT AND EXPORT PARTNERS
TABLE: MAIN IMPORTS AND EXPORTS
TABLE: CURRENT ACCOUNT BALANCE FORECASTS
TABLE: CAPITAL & FINANCIAL ACCOUNT BALANCE
Monetary Policy
Philippines To Pause Before Easing Again In 2020
Monetary Policy Framework
TABLE: MONETARY POLICY FORECASTS
Fiscal Policy And Public Debt Outlook
Philippines With Scope For Further Fiscal Stimulus In 2020
Structural Fiscal Position
TABLE: FISCAL AND PUBLIC DEBT FORECASTS
TABLE: MAIN REVENUE AND EXPENDITURE CATEGORIES
Currency Forecast
PHP: Risk Aversion To Drive Peso Movements
TABLE: CURRENCY FORECAST
THIS 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.Philippines Country Risk Q1 2020Contents10-Year Forecast
The Philippine Economy To 2028
Potential For Higher Investment Rate To Sustain Economic Growth
TABLE: LONG-TERM MACROECONOMIC FORECASTS
Political Outlook
Domestic Politics
Duterte To Maintain Warm Philippine-China Relations In The Near Term
TABLE: POLITICAL OVERVIEW
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
Downside Revisions To Stabilise Somewhat, But Policy Risks Remain
TABLE: GLOBAL MACROECONOMIC FORECASTS (2018-2023)
TABLE: DEVELOPED MARKETS – REAL GDP GROWTH, % y-o-y
TABLE: EMERGING MARKETS – REAL GDP GROWTH, % y-o-y
Index Tables
TABLE: PHILIPPINES – MACROECONOMIC DATA AND FORECASTS

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