Economist forecasts below 6% GDP growth

MANILA, Philippines — The continued impasse on the passage of the 2019 national budget is expected to drag the gross domestic product (GDP) growth to below six percent, an economist from Security Bank Corp. said.

Security Bank chief economist Robert Dan Roces said the failure of Congress to pass the proposed P3.7-trillion national budget would translate to a slower GDP growth of 5.5 to six percent for this year.

“A full-year reenacted budget will really lower GDP. Primarily, infrastructure spending will be hit. Full-year reenacted budget will probably pull down the GDP growth to about 5.5 to six percent,” Roces said.

The country’s GDP growth eased to 6.2 percent last year from 6.7 percent as inflation kicked up to 5.2 percent from 2.7 percent in 2017 due to elevated oil and food prices as well as weak peso.

Socioeconomic Planning Secretary Ernesto Pernia earlier warned economic growth would slip to the slowest in eight years at a range of 4.2 to 4.9 percent if Congress fails to pass the 2019 General Appropriations Act.

This would be the slowest since the 3.7 percent posted in 2011.

“We don’t think it will really go down to four to 4.5 percent, Roces said.

The economist is hopeful the budget would be passed soon since government spending and private consumption would depend on the new budget.

If the budget is passed after April, Roces said the GDP growth would range between six and 6.4 percent.

“We are seeing 6.4 percent, but it is a wait-and-see forecast because we really can’t tell where the government budget impasse issues are headed. But it can really go to as low as six percent,” he said.

He said the country’s GDP growth would likely slow down in the first half due to the re-enacted budget as well as the ban on government spending due to the mid-term elections in May.

“First half growth will be a slowdown because there’s no movement in terms of infrastructure spending. Having said that, it has already been factored in by economic managers because there’s still going to be a spending ban with or without the budget because of the elections,” Roces said.

Positive factors for stronger economic growth, he said, include easing inflation especially with the enactment of Republic Act 11203 or the Rice Tariffication Act.

“We are still bullish about economic growth because there are factors at play now that’s positive for us,” Roces said.