Government to revisit economic goals as outlook turns bleak
MANILA, Philippines — Economic officials will begin revisiting macroeconomic targets on Saturday to take into account fresh data on economic performance as well as recent typhoons that in the mind of observers just turned weak prospects bleaker.
Members of the Executive Technical Board, the advisory panel to economic managers composed of undersecretaries and assistant secretaries, will have an “assessment of fiscal performance and emerging growth outlook,” Finance Assistant Secretary Ma. Teresa Habitan said in an online exchange.
Targets for this year and the next will be under consideration and recommendations to the interagency Development Budget Coordination Committee, which ultimately decides on the revisions, will be made the “soonest.”
At this early though, analysts are projecting a fresh downgrade in growth targets. “The -6.6% (contraction) is already unlikely (to be reached),” Emilio Neri Jr., lead economist at Bank of the Philippine Islands, said on Friday. Gross domestic product (GDP) slumped 10% for the first 9 months.
Nicholas Antonio Mapa, senior economist at ING Bank in Manila, said an expected recovery in the fourth quarter would not come. “The recent spate of bad weather all but assures that 4Q GDP will likely deteriorate from the 3Q showing,” he said in a commentary.
Under present targets adopted last July 28, GDP is targeted to contract between 4.4% and 6.6% year-on-year, before growing between 6.5-7.5% next year. At the time, that was the third revision in economic targets in 4 months after the coronavirus health crisis messed with economic plans.
The odds are indeed not in the Philippines favor. After reopening the economy in June in order to push the economy back on track, the Duterte administration only managed to do little last quarter, with the slump languishing at double-digit scale of 11.5%, albeit an easing from a record-low of 16.5% previously.
At that level, the Philippines has officially become the laggard among the five major developing economies in Southeast Asia. Malaysia, which held the title last month, reported Friday a strong bounce-back from 17.1% decline to just 2.7% year-on-year in third quarter.
At home, banks are simply not lending despite the central bank giving them P1.7 trillion in fresh cash, while succeeding typhoons from last month had only put in jeopardy the expansion of the agriculture sector, which for the past 2 months had been the Philippines’ sole growth driver. The recent weather disturbance struck at the heart of the main metropolis just this week.
Worse, the government is not spending as quick and as big as was expected— the September spending contracted by most under Duterte government— and Mapa projects this may only force the Bangko Sentral ng Pilipinas to do more of the heavy lifting by cutting rates anew next week.
“Once again, we believe that the base case is for a pause, given the lack of efficacy at this point for additional monetary stimulus,” he said.
“However, we assign an off chance for a surprise BSP rate cut or reduction in RRR (or some form of easing) as the BSP is handed the task of supporting the ailing economy, yet again,” Mapa explained, pertaining to reserve requirements.
That said, the ING economist said if he would prefer the central bank to refrain from cutting rates in its November 19 meeting, and instead call on government to do its part and spend more.
“We would rather however have BSP pause next week and take a page out of the playbook of the Fed and call for a more vigorous fiscal response to the ongoing pandemic rather than offloading more stimulus to an already bloated financial system with liquidity all dressed up with nowhere to go,” he said. — with Prinz Magtulis
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