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The Philippines’ robust economic growth is expected to sustain, according to an ANZ research report. However, it also weakens the external accounts. The Philippine authorities have taken a benign view of the situation as the decline in current account is mainly because of imports of capital goods.
The decision of the Philippine government to increase the fiscal deficit target to 3 percent of the GDP along with initiatives to accelerate the delivery of earlier-approved infrastructure projects might also assist in stimulating growth in 2017, noted ANZ.
However, raising the medium term growth potential of Philippines would need increased levels of public investment. If the 3 percent deficit target is considered as a threshold line, the additional investments would be contingent on passing the first package of tax reforms by the Congress.
The Philippine central bank is likely to cautiously hike its interest rate corridor this year due to accelerating inflation, according to ANZ. However, the appointment of a new Governor might have a bearing on the extent and rate of tightening.
