Economic Forum with Mr. Rafael Garchitorena (An Economic Outlook for the Philippines 2018)
This year’s first Economic Forum was a great start to the new year with an attendance of nearly 60 guests who traditionally came together at the German Club on Thursday, 18th of January.

After a delicious dinner with German food, Dr. Bodo Goerlich, Vice-President of the German-Philippine Chamber of Commerce and Industry (GPCCI), announced some up-coming events such as the GPCCI’s 10th anniversary which will be celebrated this June.

Dr. Andree Bruhl, the Commercial Counsellor of the German Embassy, then introduced the speaker of the Economic Forum, Mr. Rafael Garchitorena. Mr. Garchitorena is the Chief Strategist & Co-Head of Research of Deutsche Regis Partners Inc. He gave an overview on the Philippine economic situation for 2018, underlining his forecasts visually with plenty of statistics and facts.

Mr. Garchitorena started off by announcing the new record high the Philippine Stock Exchange Index recently reached and stated that the Philippines is still one of the fastest growing economies in Asia.

The main topics for 2018, however, will supposedly be infrastructure, China’s role in the Philippines, the tax reform, and the Peso. During his presentations, Mr. Garchitorena explained positive and negative developments as well as political influences on the economy and made clear that he’s curious and optimistic about the future economic situation of the country.

His outlook included various factors such as the GDP which he said will drop slightly in 2018; which should not be of concern as it will still be amongst the highest in comparison to other emerging markets in Asia.

Another positive development declared is the manufacturing industry which Mr. Garchitorena called “a new growth driver”.

Growth is also expected to happen in infrastructure as the government announced to further invest in this sector. The implementation of Duterte’s “Build, Build, Build” (BBB) program is his “one big hope”, Mr. Garchitorena said. The question that arises from the BBB program is how the infrastructure goals will be financed which was what led the expert to his next topic: China’s role in the Philippines.

The People’s Republic of China is the biggest trade partner of the Philippines and a potential investor for the infrastructure plan. However, Mr. Garchitorena also mentioned the possibility of financing the program through the local government and added that the percentage of the government debt as a share of the GDP has constantly been decreasing.

China’s influence will furthermore be notable in the tourism and gaming sector, Mr. Garchitorena predicted. The number of Chinese tourists coming to the Philippines steadily rose over the past years and is expected to continue growing. Nearly one million Chinese tourists came to the Philippines in 2017, surpassing the amount of tourists coming from the USA. China’s involvement in outsourcing the gaming industry could be a risk for Filipinos, Mr. Garchitorena said, as it creates a dependency without sustainable employment guarantee.

Mr. Garchitorena said that he is delighted by the fact that the Tax Reform for Acceleration and Inclusion (TRAIN) passed without complications and agreed that the new reform includes useful approaches. However, less than 20 percent of the working population pays taxes, he revealed, which makes the TRAIN shine brighter than it actually is as the profitable aspects only apply for a few whereas others, such as the increase of taxes for soda drinks, apply for the whole population.

Mr. Garchitorena admitted that the outlook for the Peso is rather negative. The currency loses value in comparison to the US dollar and even reached a record low in 2016. In 2017, the Peso was still the worst performing major Asian currency. One of the factors creating the loss of value is the trade deficit of goods, Mr. Garchitorena explained adding that Bangko Sentral ng Pilipinas (BSP) forecasts a deficit of 1 billion US dollars for the current account. Despite this deficit and the falling import cover, the external position is still stable as the Gross International Reserves (GIR) still exceed foreign-exchange debts. Mr. Garchitorena further mentioned that inflation is picking up.

Mr. Garchitorena ended his presentation with an outlook about different sectors and long-term trends. Afterwards he encouraged the audience to ask questions, which they did. The diverse, critical, and interested questions reflected the informative outlook. In the end, Mr. Michael Scheile, representative of the German Club, thanked Mr. Garchitorena for his lively presentation.

The GPCCI would also like to thank Mr. Garchitorena for sharing his knowledge with the GPCCI members and all interested guests. We appreciated his contribution and hope to welcome him again!

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