‘Faster growth unlikely to be sustained in 2020’

MANILA, Philippines — The acceleration of economic growth in the third quarter may be sustained this quarter, but unlikely for next year, London-based think tank Capital Economics said.

The economy grew at a faster pace of 6.2 percent in the third quarter as government spending picked up, the agriculture sector recovered and services remained a strong contributor.

Alongside the slowdown in the growth of consumer prices and loosening of monetary policy, household consumption also rebounded and is expected to continue to pick up.

“However, these tailwinds to growth are likely to be offset by the tough external environment. We expect growth to remain lackluster as global growth continues to slow,” Capital Economics said.

“While growth is likely to see another pickup in the fourth quarter, we expect it to settle at around six percent next year,” it added.

The firm noted that the unchanged deficit under the 2020 national budget will only have a neutral effect on growth next year.

“Distortions from the delayed budget which have boosted growth should fade next year. And with the 2020 budget envisaging an unchanged deficit of 3.2 percent of GDP, it is likely to have a broadly neutral effect on growth,” said Capital Economics.

Economic growth – as measured by the gross domestic product (GDP) – accelerated to 6.2 percent in the third quarter, in line with market expectations.

This was faster compared to the 5.5 percent GDP growth in the second quarter and six percent in the third quarter of 2018.

This brings the year-to-date average to  5.8 percent, which is slightly below the lower end of the government’s full-year growth target of six percent to seven percent.

This means the Philippine economy will have to expand by at least 6.7 percent in the last quarter of the year to meet the lower end of the growth target.