The economy likely posted slower growth in the first quarter given the delay in the approval of the 2019 government budget, economists from First Metro Investment Corp. and University of Asia & the Pacific said in a joint report Thursday.
Data from the Philippine Statistics Authority showed the country’s gross domestic product grew 6.5 percent in the first quarter last year and 6.2 percent in the whole of 2018.
The economists said in the March issue of the Market Call capital markets research the deceleration of inflation rate could offset the impact of the delayed budget approval.
“The relentless fall of the headline inflation to below 4 percent within BSP target has provided much-needed good news,” they said.
“The continuing delay in the enactment of the 2019 national government budget, after all, has placed a downside risk to GDP growth in the first quarter,” they said.
Economists said that with headline inflation dropping to 3.8 percent in February, it was on track to go below 3 percent in the third quarter.
“Consumer spending should begin to recover in the first quarter, aided by more money in consumers’ hands due to election spending and to weakness in the US dollar,” they said.
The interagency Development Budget Coordination Committee reduced its growth forecast for the Philippines this year to a range of 6 percent to 7 percent from the previous target of 7 percent to 8 percent, also taking into account the delay in the approval of the national budget and external risks including the lingering trade war between the US and China.
The growth target was pegged at 6.5 percent to 7.5 percent for 2020 and 7 percent to 8 percent from 2021 to 2022.
Finance Secretary Carlos Dominguez III said the budget impasse would affect the creation of more jobs that could possibly emanate from the infrastructure projects. He said this would affect the people in general.
Economic managers urged Congress to transmit the 2019 national budget to Malacañang Palace soon so the government could sustain its investments on development priorities.
Estimates by the National Economic and Development Authority showed that a reenacted budget until April 2019 would bring down full-year GDP growth to 6.1 percent to 6.3 percent.
Neda said that if the budget was passed in August, growth could be expected at 4.9 percent to 5.1 percent. It said that with a full-year reenacted budget, growth can go as low as 4.2 percent to 4.9 percent.
Inflation peaked at a nine-year high of 6.7 percent in September and October 2018 on higher prices of rice and other food commodities. It eased to 6 percent in November and 5.1 percent in December as the immediate measures implemented by the government to curb rising prices took effect.
Inflation further eased to 4.4 percent in January and to a one-year low of 3.8 percent in February, bringing the year-to-date average to 4.1 percent which was near the upper limit of the target range of 2 percent to 4 percent.
The government is set to release the March inflation data on April 5.
The Asian Development Bank also cut its growth forecast for the Philippines this year to 6.4 percent from the previous estimate of 6.7 percent.
