Union Bank of the Philippines expects the gross domestic product growth to reach 6.4 percent in the fourth quarter, below the government’s goal of 6.7 percent for the final quarter.
The bank’s economic research unit said: “fourth-quarter GDP growth may settle at 6.4 percent, putting full-year 2019 GDP growth at 5.9 percent.”.
“This is supported by signals from the seven-year-low October imports and historically weak absorptive capacity of government agencies involved in infrastructure projects implementation including local government units,” it said.
UnionBank said both the fourth quarter and full-year 2019 GDP growth forecasts were considered “respectable and generally higher among its peers considering the sluggish global economic environment throughout the year.”
GDP growth averaged 5.8 percent in the first three quarters, underpinned by the 6.2-percent expansion in the third quarter following the sluggish 5.5-percent growth in the second quarter as the government ramped up fiscal spending especially on big-ticket infrastructure projects under the “Build, Build, Build” program.
Economic managers earlier said to achieve the low end of the target range of 6 percent to 6.5 percent for the whole year, the economy should expand by at least 6.7 percent in the last quarter.
“Economic growth, so far this year, has been led by an industry sector recovery and the continued strength of the services sector. Agriculture, with meager growth in the first half, has significantly recovered in the third quarter,” the report said.
“Private consumption has slightly recovered in the third quarter and is strongly believed to be growing further in the fourth quarter as domestic demand rises mainly because of the usual uptick of seasonal spending. The delayed 2019 national budget has clearly been the primary cause of the slowdown in government consumption in much of the first half of 2019,” the bank said.
The bank said capital formation or investments in the economy took a big hit registering huge negative growth in the second and third quarters.
“UnionBank’s economic research unit believes that capital formation can pick up in the fourth quarter as the budget spending continues to catch-up. Trade will continue to be sluggish as the fickle nature of the US-China trade negotiations continue its state of flux. The recent October data confirm the continued weakness of external demand where exports were flat and imports were shown to be declining in its fastest clip in seven-and-a-half years,” the bank said.