Global debt watcher Moody’s Investor Service on Wednesday reduced its 2019 growth forecast for the Philippines to 6 percent from a previous estimate of 6.2 percent, taking into account the lackluster economic growth in the first quarter and the delayed approval of the national budget.
Moody’s senior credit officer Christian de Guzman said in an economic forum held by the Economic Journalists Association of the Philippines in partnership with the Aboitiz Group in Makati City that the slower expansion in the first quarter compelled the ratings agency to lower its full-year GDP forecast for the country.
“On the basis of a few things… I guess you know first of all you had the budget impasse and you saw the GDP [of 5.6 percent in the first quarter],” de Guzman said.
De Guzman also cited the external headwinds in the downward revision of the growth forecast, including the lingering trade tension between the US and China.
Finance Secretary Carlos Dominguez III earlier said the government needed to increase its expenditures in the months ahead to achieve economic growth of more than 6 percent this year.
“To enable us to hit a GDP growth rate above 6 percent this year, national government needs to ramp up its spending. In 2019, national government disbursements are targeted to reach P3.774 trillion, equivalent to 19.6 percent of GDP. This is 10.7-percent higher than the actual disbursement in 2018,” Dominguez said after the Economic Development Cluster meeting held at the Department of Finance headquarters in Manila on Friday.
“For us to achieve this year’s disbursement target, the government must spend a total of around P2.996 trillion from the second to fourth quarters of the year,” Dominguez said.
He said infrastructure spending accounted for almost one-third of the amount of disbursements programmed for the said quarters. Actual infrastructure disbursements in the first quarter amounted to P207.2 billion.
“To reach our total infrastructure disbursement target of P1 trillion for the entire year, the government must disburse around P792.97 billion for infrastructure from the second to fourth quarters of the year,” he said.
Dominguez said total infrastructure disbursements should reach one P1 trillion, equivalent to 5.2 percent of GDP, with the national government accounting for P808.7 billion of targeted infrastructure spending,” he said.
The cluster held a meeting to formulate a carefully crafted and bold expenditure catch-up plan to hit a GDP growth rate of above 6 percent this year.
“The delay in passing the 2019 budget during the first three months of this year hit our economy hard. Public spending plays a crucial role in supporting the rapid expansion of domestic economic activity. This led to our GDP growth rate for the first quarter to fall below expectations, a four-year low of 5.6 percent,” Dominguez said.