Capital Economics downgrades Philippines growth forecast

MANILA, Philippines — A continued growth slowdown in the second quarter points to a moderate recovery in the second half and a weaker full-year growth in 2019, said London-based Capital Economics.

In a brief yesterday, the think tank also downgraded its full-year growth expectations for the Philippine economy to 5.8 percent from its earlier forecast of six percent.

Domestic economic output slowed further to 5.5 percent in the second quarter from 5.6 percent in the first quarter, still reeling from the effects of the delayed passage of the national budget and the election season ban on project spending.

Consumption spending also slowed down because of the disturbances in water supply especially in Metro Manila.

“While we do expect a recovery     in growth over the second half of this year, we don’t think it will be especially strong. The economy still faces a number of headwinds,” Capital Economics said.

“The external environment is set to remain tough. We expect global growth to weaken further over the coming quarters. The intensification of the US-China trade war is an additional headwind. Industrial output is likely to remain sluggish as a result,” it added.

The firm noted that while government spending has been slower to rebound than expected, it should eventually boost growth as delayed spending comes on stream.

This should also help investment to recover as infrastructure projects get back into full swing.

Meanwhile, growth in household consumption should also strengthen as easing price pressures help boost the disposable incomes of consumers.

Growth in consumer prices eased further to 2.4 percent in July from 2.7 percent in June and is expected to slow down further in the coming months.

Capital Economics also expects the central bank to embark on a more aggressive monetary easing to respond to slowing growth.