Slower inflation, higher spending to boost GDP in H2

MANILA, Philippines — The continuing slowdown in inflation, as well as the expected pick-up in public spending is intended to  boost the country’s economic growth in the second semester of 2019, the Department of Finance (DOF) said yesterday.

According to Finance Undersecretary Gil Beltran, easing inflation and higher infrastructure spending would support the government’s goal of a six to seven percent gross domestic product (GDP) growth for 2019.

“Slower inflation will give room for government to aim at higher GDP growth. Meanwhile, the catch-up plan for implementing infrastructure projects will boost public investment growth in the second semester and push the economy closer to the six to seven percent GDP growth goal,” Beltran said.

Inflation further eased to 1.7 percent in August, slower than the 2.4 percent recorded in July and the 6.4 percent posted in the same month last year. This was also the slowest pace since inflation settled at 1.8 percent in October 2016.

This brought the year-to-date average price increase to three percent, the midpoint of the government’s two to four percent target range.

“The decline in inflation is traced to the lower rate of increase in the prices of both food and non-food items. Rice price, in particular, clocked its largest year-on-year decline of 5.2 percent. Lower international energy prices also translated to a decline in domestic fuel and electricity and transportation prices,” Beltran said.

He said inflationary momentum is also exhibiting a slowdown, as shown by the core inflation which eased to 2.9 percent last August and month-on-month inflation, which slowed down to 0.17 percent from 0.25 percent in July.

Meanwhile, the Department of Budget and Management (DBM) said government disbursements are starting to pick up, following the 3.4 percent increase in expenditures in July to P339.4 billion from P328.1 billion in the same month last year.

The DBM said expenditures would continue to recover in the second half as spending from the Department of Public Works and Highways and the Department of Transportation would be concentrated in the remaining months of 2019.

The economy expanded by 5.5 percent in the second quarter of 2019 – its slowest growth in 17 quarters – from 5.6 percent in the previous quarter and 6.2 percent in the second quarter of 2018.