Growth seen picking up to 6.7% next year

Nomura Securities Ltd. expects the country’s gross domestic product (GDP) growth to pick up to 6.7 percent next year from the original target of six percent this year as Congress is on track to pass the 2020 national budget.

In a report, Nomura economist Euben Paracuelles said their latest projections are higher than the consensus of 5.7 percent for 2019 and 6.1 percent for 2020.

Economic managers pegged the GDP growth target at six to seven percent for this year and 6.5 to 7.5 percent for next year.

In the first three quarters, the economy grew by 5.8 percent, slightly below the low end of the government target due to soft global markets amid the US-China trade war, the delayed passage of the 2019 national budget, as well as the series of rate hikes by the Bangko Sentral ng Pilipinas (BSP) last year.

“Compared to the 2019 budget which suffered a four-month delay and contributed to the growth slowdown in the first half, every step of this year’s budget approval process in Congress has been done much earlier, consistent with deliberate efforts to avoid a repeat of the 2019 budget delay,” Paracuelles said.

The economist said Congress is on track to pass the 2020 national budget before the end of the year.

“This appears to leave the bicameral committee with sufficient time to agree on a final version of the budget before Congress goes on recess on Dec. 20, and indeed for the President to enact the budget before the start of the new year,” he said.

In addition, Paracuelles said the Senate also approved a bill to extend the validity of the 2019 budget through Dec. 31, 2020.

“This is relevant because, after the shift to cash-based budgeting, government agencies are required to spend their allocations within the fiscal year. So the four-month delay to passing the 2019 budget necessitated the extension of its validity beyond this fiscal year to allow for the disbursement of any remaining unspent allocations in the early part of 2020, instead of being sent back to the treasury,” he said.

Paracuelles said accelerating public investment spending and strengthening overall domestic demand would translate to a V-shaped growth trajectory in coming quarters.