Economists mixed on full-year GDP outturn

MANILA, Philippines — Economists gave a mixed picture of how the Philippine economy would perform by the end of the year.

Moody’s Investor Service now expects the country’s gross domestic product (GDP) to fall below six percent this year after growth exceeded six percent for seven consecutive years.

The debt watcher sees GDP growth slowing further to 5.8 percent instead of six percent this year after easing to 6.2 percent in 2018 from 6.7 percent the previous year.

“Our expectation of a recovery in domestic demand in the second half of this year and into next year underpins our full-year forecasts for real GDP growth of 5.8 percent in 2019 and 6.2 percent in 2020,” Moody’s said in its latest annual credit analysis for the Philippines.

Following the approval of the 2019 budget in April and the subsequent ban on spending ahead of the midterm elections in May, the government sought to accelerate budgetary spending over the remaining months of the year. At the same time, stable remittance inflows, low inflation and historically low unemployment will also support household consumption.

UK-based Oxford Economics likewise downgraded its growth forecast for the Philippines to 5.7 percent this year from its previous forecast of 5.9 percent.

The macroeconomy research firm said that while the domestic economy is expected to recover in the second semester after the lower-than-expected growth of 5.5. percent in the second quarter, risks remain on the downside as exports remain under pressure because of the escalation of the US-China trade war.

Growth in the second quarter slowed down from 5.6 percent in the first quarter.

Oxford noted that while household spending grew 5.6 percent year-on-year, a sharp fall in government spending weighed heavily on growth.

Investment growth contracted by 4.8 percent year-on-year as delays in the rollout of new infrastructure projects saw public construction contract by 27.2 percent.

Security Bank chief economist Robert Dan Roces, meanwhile, expects the economy to stay above six percent this year with a rebound in the second half after a disappointing growth in the first semester due to the delayed passage of the 2019 national budget.

Roces said the country’s GDP is seen growing slightly above six percent after slowing down to a four-year low of 5.5 percent in the second quarter.

“The worst may be behind the Philippine economy coming into the second half, yet stronger external headwinds such as the protracted US-China trade war,” Roces said.

Roces said slowing growth, easing inflation as well as the resulting downside risks to investments due to the US-China trade tensions would give the Bangko Sentral ng Pilipinas “scope for another 25 basis points cut by year end to support and sustain growth coming into 2020.

Consistent with the fall in investment, import growth was flat during the period and, despite slower export growth, net exports made a positive contribution to annual growth in the second quarter.

ING Bank Manila senior economist Nicholas Mapa also expects the country’s GDP growth to stay above six percent this year as the BSP steps on the accelerator to help chase the country’s six percent to seven percent growth target.

“With BSP’s recent string of easing and government spending back online in H2, the Philippines will look to finish the year strong with growth fueled by all sectors of the economy to get growth above six percent by yearend,” Mapa said.