Citi sees below 6% growth this year

MANILA, Philippines — Citi expects the country’s full-year gross domestic product (GDP) growth falling below six percent for the first time since 2011 despite the expected pick up in the second half after a dismal performance in the first semester.

Nalin Chutchotitham, economist at Citi, said the bank has adjusted its 2019 economic growth forecast for the Philippines to 5.9 percent and to 6.2 percent for next year due to the sluggish performance in the first half.

The country’s GDP growth eased to a four-year low of 5.5 percent in the second quarter from 5.6 percent in the first quarter due primarily to the delayed passage of the 2019 national budget.

GDP growth averaged 5.55 percent in the first half, lower than the six to seven percent target set by economic managers.

The last time the country’s GDP growth was below six percent was in 2011 at 3.9 percent.

Despite external factors, Chutchotitham said the positive outlook on Philippine growth remains.

According to Chutchotitham, infrastructure spending in the second half and passage of additional tax reforms would help accelerate growth. “We do still believe in a very positive growth story and also a very benign inflation outlook. There’s also more room for fiscal spending and more room for monetary easing,” Chutchotitham said.

Citi Philippines country treasurer Paul Favila said the Philippines stands out as one of the few economies that seems to be forging ahead despite lackluster conditions all around.

“The Philippines is quickly moving into a very interesting phase of progress. There are many remarkable developments rolling out all around us. Infrastructure build-out is going full steam and more importantly, we are beginning to enjoy the benefits of some of these endeavors,” Favila, who is also head of Citi’s markets and securities services said.

During Citi Philippines’ annual Perspectives Forum, Bangko Sentral ng Pilipinas Governor Benjamin Diokno called the slow down in GDP growth in the second quarter as a “blip” as it was caused by government underspending in the first half of the year and the late passage of the 2019 budget.

Diokno said the government is committed to fast track the implementation of projects to make up for the “lower-than-planned” state spending for the first semester.

The BSP chief added he continues to be optimistic that overall prospects for the Philippine economy for this year and next year remain bright and growth momentum can be sustained over the medium-term.

“The Philippines has been one of the fastest growing economies in the world and has enjoyed 82 consecutive quarters of uninterrupted growth with an average growth rate of 6.5 percent from 2012 to 2018. This momentum is expected to continue,” Diokno said.

He said the International Monetary Fund, the World Bank and the Asian Development Bank offer similar favorable assessments with their projections in line with the government’s official targets.