The Asian Development Bank (ADB) has cut its 2019 growth prediction for the Philippines to 6.2 percent, primarily owing to government underspending at the beginning of the year that pushed first-quarter economic expansion to a four-year low.
The Asian Development Outlook Supplement study published Thursday by the multilateral lender based in Manila showed a reduced gross national product (GDP) growth projection for this year from 6.4 percent earlier, even as it held the 2020 prediction at 6.4 percent quicker now.
The ADB’s 2019 GDP development forecast for the Philippines matched last year’s real 6.2 percent development, although it was the slowest rate in three years.
Growth in the Philippines moderated from 6.3 percent year-on-year in the fourth quarter of 2018 to 5.6 percent in the first quarter of this year as the delayed passage of the national budget held back government spending. Public construction contracted by 8.6 percent while growth in government consumption eased from 12.6 percent year-on-year in the fourth quarter of 2018 to 7.4 percent in the first quarter of 2019.
As a consequence of lackluster global trade and financial activity and the downturn in the electronics cycle, growth in exports of products and services also slowed. These impacts were partially offset by greater household consumption and personal investment.
To recall, President Duterte signed the P3.7 trillion 2019 national budget only in mid-April as the two houses of Congress earlier squabbled over “pork” funds.
As a result, government operated using reenacted 2018 appropriations during the first four months and underspent about P1 billion a day on public goods and services.
Growth in GDP in the first quarter thus fell below the downgraded 6-7 percent full-year target range of the government.
On the flip hand, the ADB expects inflation to ease to 3 percent this year on the back of reduced food price which is a slower pace than its previous 2019 forecast of 3.8 percent and below the 10-year high 5.2 percent rise in fundamental commodity prices reported in 2018.
Inflation in the Philippines slowed in June to 2.7 percent, averaging 3.4 percent in the first quarter. Rice prices have declined on enhanced production since the lifting of quantitative restrictions on rice imports in February.
However, the ADB sees headline inflation next year at a higher 3.5 percent, maintaining its earlier forecast due to an expected pickup in global commodity prices.