WB cuts PH growth forecast slightly

In 2018

The World Bank (WB) has downgraded its growth projection for the local economy to 6.4 percent in 2018 from its previous forecast of 6.5 percent made last October, citing the impact of a reenacted national budget on investments and spending.

In a statement on its latest Philippines Economic Update, the World Bank said the 2019 GDP growth estimate is also reduced to 6.5 percent from an earlier projection of 6.7 percent.

“A strong, consistent delivery of the infrastructure investment agenda while sustaining improvements in health, education and social protection will be key to maintaining the robust and inclusive growth outlook of the Philippines,” according to World Bank senior economist, Rong Qian.

The government itself has cut its own GDP projection from six to seven percent this year to 6.5-6.9 percent after a slow first half performance. The inter-agency Development Budget Coordinating Council however kept the six-seven percent target band for 2019 and 2020.

While the World Bank still considers the country as one of the fast-growing economies in the East Asia and the Pacific Region, a weaker external sector is a concern, as well as a still elevated inflation environment – although coming down – and investments may be affected if the 2019 budget will be a reenacted version.

“While persistent high inflation may temper private consumption growth in the fourth quarter of 2018, a moderation in inflation in following quarters is expected to boost consumer confidence and raise private consumption in 2019,” the World Bank said in an update.

“Also, the mid-term election in May (2019) is also expected to strengthen consumption by temporarily raising employment and disposable incomes in early 2019,” it added.

The World Bank expects investment growth to be “tempered” in the first six months of next year because of “possible reenactment of the first-quarter 2019 budget following a delay in the budget approval process. Moreover, global trade is expected to remain weak, thus dampening exports,” it said.

In the third quarter this year, the country’s GDP growth further slowed to 6.1 percent from the previous quarter’s 6.2 percent. To achieve the 6.5-6.9 percent full-year revised target, the economy has to grow by seven percent in the last quarter of 2018.

In the meantime, the Bangko Sentral ng Pilipinas has reduced its 2019 and 2020 inflation forecasts, as well as its 2018 inflation estimate which is now 5.2 percent from 5.3 percent earlier, during its November 15 Monetary Board policy meeting.

For next year, inflation rate is projected to average 3.18 percent and 3.04 percent for 2020. These numbers are lower than previous forecast of 3.5 percent and 3.3 percent, respectively, for 2019 and 2020.