IMF further trims Philippines growth forecast

MANILA, Philippines — The International Monetary Fund (IMF) has lowered anew the gross domestic product (GDP) growth forecasts for the Philippines over the next two years primarily due to the disappointing performance in the first quarter.

Yongzheng Yang, IMF’s resident representative to the Philippines, said the multilateral lending agency slashed its GDP growth forecasts to six percent this year and to 6.3 percent for next year.

The latest projections are lower than the previous forecasts of 6.5 percent for 2019 and 6.6 percent for 2020.

“The downward revisions mainly reflect weaker-than-expected external demand and weaker-than-expected public investment, partly due to the delayed approval of the 2019 budget,” Yang said.

The country’s gross domestic product (GDP) growth slowed down to the lowest level in four years at 5.6 percent in the first quarter from 6.3 percent in the fourth quarter of last year due to the budget impasse.

With the delayed passage of the 2019 national budget, the government operated on a reenacted 2018 budget affecting major infrastructure projects including those under the Build Build Build program.

Economic managers through the Development Budget Coordination Committee (DBCC) are still aspiring to hit the six to seven percent GDP growth target for this year despite the sluggish first quarter and retained the 6.5 to 7.5 percent target for 2020.

Despite the lowering of the 2019 and 2020 GDP growth targets, Yang said the Philippines would remain the fastest or one of the fastest growing economies in the region.

 “Note that these revised forecasts are still among the highest in the region, and that growth will continue to be driven by strong domestic demand,” Yang said.

The IMF now expects the global economy to expand by 3.2 percent this yea, 0.1 percentage points lower than its previous forecast in April and 0.3 percentage points below its estimate at the start of the year.

The trimmed forecasts take into account the US-China trade war, lingering Brexit worries and muted inflation. A growth of 3.3 percent or lower would be the weakest since 2009.

“Risks to the forecast are mainly to the downside. “They include further trade and technology tensions that dent sentiment and slow investment; a protracted increase in risk aversion that exposes the financial vulnerabilities continuing to accumulate after years of low interest rates,” IMF said in its July 2019 World Economic Outlook.

For 2020, the multilateral lender expects the global GDP growth to recover to 3.5 percent.