ADB trims Phl growth forecast to 6.2%

The Asian Development Bank (ADB) has trimmed anew its growth forecast for the Philippines this year due to the dismal economic output in the first quarter.

In a supplement to its Asian Development Outlook for this year, the Manila-based multilateral bank lowered its economic growth forecast for the Philippines to 6.2 percent this year from the earlier 6.4 percent outlook in April and its initial estimate of 6.7 percent.

The growth forecast of 6.4 percent was retained, however, for 2020.

Growth eased to 5.6 percent in the first quarter as the delayed passage of the national budget held back government spending for infrastructure and crucial programs.

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.

“Growth in exports of goods and services also slowed as a result of lackluster global trade and economic activity and the downturn in the electronics cycle. These effects were partly offset by higher household consumption and private investment,” ADB said.

Passage of the national budget was delayed after lawmakers locked horns over alleged last-minute insertions in the general appropriations bill.

ADB noted, however, that government spending is expected to pick up in the second half of the year following the enactment of the budget in April as more projects come on stream, therefore fuelling growth.

“Slowing inflation, low unemployment and steady remittances will continue to support household consumption,” the bank said.

Domestic inflation slowed down to 2.7 percent in June after an uptick in May to average 3.4 percent in the first six months of the year.

ADB sees the growth in consumer prices averaging at three percent in 2019, slower than its April forecast of 3.8 percent. For 2020, the average inflation growth forecast of 3.5 percent was retained.

Even at a downward revised growth forecast, the Philippines can still be expected to be among the fastest growing economies in Asia and outperform the regional growth average.

Developing Asian countries are expected to grow by an average 5.7 percent in 2019 and 5.6 percent in 2020, steady from the April forecast.

Growth in the region is expected to be steady despite the threat of a global trade war as many countries can still bank on strong domestic consumption.

Socioeconomic Planning Secretary Ernesto Pernia has said President Duterte would not allow a reenactment of the 2019 budget for 2020 and that despite the remaining pockets of instability in Congress—especially in the House of Representatives where the budget will originate—the legislative branch could be expected to submit the budget for signing on time.