IMF lowers 2019 growth forecast for Philippines to 5.7%

MANILA, Philippines — The International Monetary Fund (IMF) has lowered anew its economic growth forecasts for the Philippines for 2019 and 2020 due to the disappointing performance in the first half, as well as external headwinds caused by the US-China trade war.

Based on the latest World Economic Outlook (WEO), the multilateral lending agency further slashed its economic growth forecasts for the Philippines to 5.7 percent this year and to 6.2 percent next year.

The latest projections are lower than the six percent for 2019 and 6.3 percent for 2020 based on the July 2019 WEO update.

The Philippines is expected to post the second fastest GDP growth this year after Vietnam’s 6.5 percent, but faster than Indonesia’s five percent, Malaysia’s 4.5 percent and Thailand’s 2.9 percent.

However, the Philippines is still expected to be the second fastest growing economy next year among the Association of Southeast Asian Nation (ASEAN)-5 after Vietnam’s 6.5 percent, Indonesia’s 5.1 percent, Malaysia’s 4.4 percent, and Thailand’s three percent.

The revision could be traced to the slower-than-expected GDP growth in the second quarter due to the delayed implementation of the 2019 national budget as well as the worsening external environment.

With the delayed approval of the 2019 national budget, the government operated on a reenacted 2018 budget, affecting major infrastructure projects including those under the Build Build Build program.

Economic managers through the Development Budget Coordination Committee (DBCC) are still aspiring to hit the six to seven percent GDP growth target this year despite the sluggish first quarter and retained the 6.5 percent to 7.5 percent target for 2020.

The country’s GDP growth slowed down to 5.5 percent in the first half from 6.3 percent in the same period last year due to soft global markets, as well as the impact of the delayed passage of this year’s budget.

The slowdown could also be attributed to the tightening cycle that saw interest rates jump by 175 basis points last year as inflation spiraled to 5.2 percent from 2.9 percent in 2017 due to the elevated oil and food prices as well as weak peso.

Based on the latest WEO, the IMF sees inflation easing to 2.5 percent this year and further to 2.3 percent for 2020.

The IMF now expects the global economy to expand by three percent, 0.2 percentage point lower than the previous target of 3.2 percent.

“This subdued growth is a consequence of rising trade barriers, elevated uncertainty surrounding trade and geopolitics, idiosyncratic factors causing macroeconomic strain in several emerging market economies and structural factors, such as low productivity growth and aging demographics in advanced economies,” the IMF said.