SBC trims GDP growth forecast to 5.7%

MANILA, Philippines — Security Bank Corp. has slashed the country’s economic growth forecast for this year due to the trade war between the US and China as well as the impact of the delayed passage of the 2019 national budget.

Robert Dan Roces, economist at Security Bank, said in a report titled “Government spending critical to growth given trade war uncertainty,” the bank now expects the country’s gross domestic product (GDP) growth to slow down to 5.7 percent this year from 6.2 percent last year.

The country’s GDP expansion slowed 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 weak global markets as well as the failure of Congress to pass this year’s budget on time.

The GDP growth averaged 5.5 percent in the first half, lower than the six to seven percent target set by economic managers through the Development Budget Coordination Committee (DBCC).

Roces said the bank sees the GDP growth to recover in the second half of the year to about six percent.

“Growth of six percent for the second half of 2019 is doable, but increasingly challenging, and may be conditional upon the speed of project deliveries in the second half given that 91 percent of funds have already been released,” he added.

The Bangko Sentral ng Pilipinas (BSP) has so far slashed interest rates by 50 basis points this year due to easing inflation and the slower-than-expected GDP growth.

It also lowered the reserve requirement ratio for big and mid-sized banks by 200 basis points and for small banks by 100 basis points, freeing up about P210 billion to boost the economy.

“Another interest rate cut by the central bank may also help charge growth for the rest of the year; but given the challenges our revised GDP estimate is now 5.7 percent for full year 2019,” Roces said.

Security Bank was looking at a GDP growth range of between six and 6.2 percent for 2019.

According to Roces, government spending would prove critical as a form of coping mechanism if the country wants to get by the current unpredictable trade war environment.