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Market Research Report

Philippines Country Risk Report Q1 2020

Published by Fitch Solutions, Inc. Product code 203087
Published Content info 69 Pages
Delivery time: 1-2 business days
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Philippines Country Risk Report Q1 2020
Published: October 25, 2019 Content info: 69 Pages
Description

Key View:

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 deteoration 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.

Table of Contents
Product Code: CFPH_20200101

Table of Contents

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
    • Philippines' weak Q219 growth reading, confirms our view that the economy is set to slow in 2019, with headwinds for 2020 building

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
    • The Bangko Sentral Ng Pilipinas (BSP) will maintain its dovish stance over the coming quarters, due to softer domestic demand pressures and external demand headwinds
  • Monetary Policy Framework
    • TABLE: MONETARY POLICY FORECASTS

Fiscal Policy And Public Debt Outlook

  • Philippines With Scope For Further Fiscal Stimulus In 2020
    • We at Fitch Solutions anticipate the Philippines to run a wider budget deficit in 2020 than in 2019, owing to a greater reliance on government stimulus to drive economic growth

Structural Fiscal Position

  • TABLE: FISCAL AND PUBLIC DEBT FORECASTS
  • TABLE: MAIN REVENUE AND EXPENDITURE CATEGORIES

Currency Forecast

  • PHP: Risk Aversion To Drive Peso Movements
    • The Philippines peso will be increasingly being driven by wider movements in investor sentiment towards emerging market assets, and less so by domestic monetary easing
  • TABLE: CURRENCY FORECAST

10-Year Forecast

The Philippine Economy To 2028

  • Potential For Higher Investment Rate To Sustain Economic Growth
    • Ongoing political and economic reforms, as well as increasing foreign investor interest, will help to speed up investment growth in the Philippines
  • TABLE: LONG-TERM MACROECONOMIC FORECASTS

Political Outlook

Domestic Politics

  • Duterte To Maintain Warm Philippine-China Relations In The Near Term
    • Despite lingering tensions over sovereignty claims in the South China Sea between the Philippines and China, we expect Philippine President Rodrigo Duterte to continue to seek to build ties with Beijing
  • TABLE: POLITICAL OVERVIEW

Long-Term Political Outlook

  • Prospects For Improving Governance
    • The Philippines faces a number of political challenges over the coming years that, if handled successfully, could improve governance. However, given low income levels and high levels of inequality, we expect the political scene to remain vulnerable to intermittent instances of turmoil

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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