"The ADB is not out of line in suggesting a deterioration in the Philippine economy’s growth prospects and downscaling its forecast for Philippine economic growth."
"The ADB is not out of line in suggesting a deterioration in the Philippine economy’s growth prospects and downscaling its forecast for Philippine economic growth."With 2019 heading toward the end of its last quarter, the leading financial institutions are looking back at the Philippine economy's performance in the last three quarters in order to determine whether and where adjustments need to be made to their earlier quarterly and semestral forecasts. One of the first to have done so is Asia's very own development bank, Manila-headquartered Asian Development Bank (ADB).
Following a review of the changes that have taken place in this country's economic environment since the end of 2018, ADB has decided to take a somewhat less sanguine view of the Philippine economy's 2019 growth prospects. At the end of 2018 Asia's development bank believed that near-term economic conditions were such as to make possible 6.4 percent growth of Philippine GDP (gross domestic product) in 2019; in its most recent Asian Development Outlook supplementary report ADB said it reduced the figure to 6.2 percent. At 6.2 percent, the Philippine economy would be growing at the same rate as in 2018, when GDP posted its lowest growth rate in three years.
What changes in the Philippine economy's operating environment did ADB put forward to justify its 2-percentage-points downscaling of its 2019 growth prospects? ADB identified two culprits: the late approval of the 2019 GAA (General Appropriations Act)—President Duterte signed it into law in late April—and the decline in exports of both goods and services.
"Growth moderated in the Philippines, from 6.3 percent year-on-year in the fourth quarter of 2018 to 5.6 percent in the first quarter of 2019, (because of) the delayed passage of the national budget," ADB declared. "(It) held back government spending, (and) public construction contracted by 8.6 percent while growth in government consumption eased, year-on-year, from 12.6 percent in the fourth quarter of 2018 to 7.4 percent in the first quarter of 2019."
Asia's development bank said that the negative effect of the 2019 national budget's delayed passage was reinforced by what it called lackluster global trade and economic activity," ADB said. Growth in exports of goods and services slowed as a result of… the downturn in the electronics cycle," it noted.
ADB hinted that it might have downscaled its 2019 Philippine GDP growth projection by more than two percentage points were it not for the operation of two positive factors: higher household consumption and higher private investment." The increase in household consumption undoubtedly was partly a result of the steady decline in consumer prices."Inflation in the Philippines slowed to 2.7 percent in June 2019, averaging 3.4 percent in the first half," it noted.
Annual GDP growth rates of 6.2 percent and 6.4 percent are within the 6-7 percent range targeted by the Philippine Development Plan, 2017-2022.
Is the ADB out of line in suggesting a deterioration in the Philippine economy's growth prospects and downscaling its forecast for Philippine economic growth in 2019? It is not. Citing varying negative factors, most of the other international financial institutions—including the World Bank and the International Monetary Fund—have been revising downward their forecasts for 2019 Philippine economic growth.