ING sees lower Philippine growth target

Budget catch-up plan to help meet 6% GDP

MANILA, Philippines — Dutch financial giant ING Bank said the catch-up plan for government spending continues to work with the goal of meeting the lower end of the revised six to 6.5 percent gross domestic product (GDP) growth target.

Nicholas Mapa, senior economist at ING Bank Manila, said government expenditures jumped 22.4 percent in November, making up for lost time due to the delayed implementation of the 2019 national budget.

“So far, spending in the Q4 of 2019 posted 11.7 percent growth, keeping hopes alive for a strong 4Q GDP finish for the Philippines,” he said.

 Mapa said the budget deficit widened 17 percent to P60.9 billion as the growth in spending outpaced revenue collections.

He said the strong expenditure showing by the government adds another case for fourth quarter GDP to zoom to 6.6 percent, helping bring full year growth to the lower end of the government’s six to 6.5 percent target.

“Expect a photo finish to Q4 GDP growth with full year growth likely at six percent for 2019,” he said.

 The country’s GDP growth averaged 5.8 percent in the first three quarters of the year, lower than the target set by economic managers due to soft global markets resulting from  the US-China trade war, the delayed implementation of the 2019 national budget, and the tightening cycle by the Bangko Sentral ng Pilipinas in 2018.

 The GDP expansion accelerated to 6.2 percent in the third quarter after slumping to a four-year low of 5.5 percent in the second quarter from 5.6 percent in the first quarter.

Inflation averaged 2.5 percent from January to November, well within the BSP’s two to four percent target, despite picking up to a three month high of 1.3 percent in November from a 43-month low of 0.8 percent in October.

The benign inflation environment allowed the central bank’s Monetary Board to slash interest rates by 75 basis points, partially unwinding a tightening episode that saw rates rise by 175 basis points.

“Consumption activity should remain robust with inflation subdued, all the more powered by the more than eight percent pickup in overseas Filipino remittance flows,” Mapa said.

BSP Governor Benjamin Diokno has signaled further rate cuts next year for a cumulative reduction of 50 basis points as well as the resumption of the reduction in the reserve requirement ratio for banks to free up liquidity in the financial system.

 “Two months of decent car sales growth coupled with a resumption in construction activity points to revitalized investment activity as the sector recovers from two straight quarters of negative growth as Diokno dials back the 2018 rate hike cycle,” Mapa said.