FIRST Metro Investment Corp., the investment banking unit of the Metrobank Group, reduced its growth forecast for the Philippine economy this year due mainly to lower government spending and slower-than-expected movement in infrastructure.
First Metro saw the country’s gross domestic product growing 6.5 percent to 7 percent, slower than the 7 percent to 7.5 percent estimate it made at the beginning of the year.
“We expect the Philippine economy to grow at a slower pace if government spending does not accelerate before the end of the year,” First Metro president Rabboni Francis Arjonillo said in a mid-year economic briefing in Makati on Wednesday.
But he said if the “Build Build Build” campaign of the Duterte administration—which is expected to increase the productive capacity of the economy, create jobs and strengthen the investment climate—would move at a faster pace, the above 7-percent growth could still be achieved.
Arjonillo also said the implementation of the government’s proposed comprehensive tax reform program would give the economy a push.
Infrastructure spending is still seen to grow by 4.5 percent to 5 percent of GDP this year. This is slower than the government’s target infrastructure spending of 5.3 percent of GDP for 2017.
Economic growth decelerated to 6.4 percent in the first quarter, the slowest since 6.3 percent in the fourth quarter of 2015, pulled down by base effects and the absence of robust spending that was evident a year ago in the run-up to the May presidential elections.
Public construction expanded just 2 percent in the first quarter, compared with the 38.5-percent growth registered in the same period a year ago.
The first-quarter GDP expansion was slower than 6.8 percent a year ago and 6.6 percent in the last quarter of 2016. Manufacturing, trade and other services were the main drivers of growth during the period.
Despite the slower growth, National Economic and Development Authority director-general and Economic Planning Secretary Ernesto Pernia said the Philippines remained one of the strongest performers among the major emerging economies in Asia.
Earlier, the World Bank slightly reduced its growth forecast for the Philippine economy this year to 6.8 percent from the 6.9-percent estimate made in April due mainly to slower public spending in the first three months of 2017.