October 12, 2019
A regional think tank lowered its Philippine economic growth projection for 2019 and 2020 on Friday, a day after the World Bank cut its own projection on account of the slowdown in public investments and weakening global economic growth.
In a statement, the Asean+3 Macroeconomic Research Office (AMRO) said it now forecast growth to hit 6.0 percent this year and 6.4 percent next year, compared with the earlier 6.3 percent and 6.5 percent, respectively.
The revised 2019 figure is lower than the 5.8 percent projected by the World Bank and the same as the Asian Development Bank’s. The 2020 figure is also lower than the Washington-based bank’s 6.1 percent, but higher than the Manila-based lender’s 6.2 percent.
The think tank based the revised outlook on a preliminary assessment following its annual consultation visit to the country from September 30 to October 9. AMRO lead economist Siu Fung Yiu, director Toshinori Doi and chief economist Hoe Ee Khor led the visit.
“The Philippine economy is expected to recover from a soft patch in the first half of 2019 as the government ramps up fiscal spending. Macroeconomic policies should focus more on supporting growth amid headwinds from a slowing global economy,” AMRO said.
Gross domestic product growth decelerated a four-year low of 5.5 percent in the first half of the year on account of the four-and-a-half-month delay in the approval of this year’s national budget and weakened state spending.
Despite the trimmed outlook, AMRO expects the economy to rebound in the second half from the “slowdown caused by the budget [impasse] and spending freeze before the midterm [elections],” Yiu said.
“However, heightened uncertainties in the external environment could exert further pressures on the Philippines’ growth and prompt financial market volatilities. Policies should be calibrated to address these challenges,” Yiu added.
Growth drivers include the increase in fiscal spending, especially on infrastructure; and low inflation, which AMRO projects to settle within the government’s 2.0 to 4.0-percent target range as global oil prices and domestic food prices are expected to be contained and demand pressure to remain subdued.
AMRO said that while the current account deficit could widen in the second half on the back of investment and growth pick-up, the full-year result would still be lower than 2018’s.
Capital inflows would also be sustained because of the easing bias of major central banks, while the banking system will remain sound on the back of stable capitalization and liquidity.
“The government’s commitment to prudent fiscal discipline will help contain debt accumulation, while fiscal reforms will continue to improve revenue mobilization capacity,” AMRO said.
Short-term risks to growth will come from external sources, according to the think tank. These include the trade war between the United States and China; policies of major central banks; and Brexit, which weighed on business sentiments and investment spending.
Locally, policy restrictions on Philippine offshore gaming operators and the ban on new economic zones in the National Capital Region may lead to downward pressures on property markets, AMRO said.
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