Union Bank of the Philippines, the country’s eighth-largest lender in terms of assets, expects the gross domestic product to grow 6.6 percent in 2020, amid expectations that the government budget will be signed on schedule.
“With the extension of the validity of the 2019 national budget and the almost-there legislation of the 2020 budget of P4.1 trillion, 2020 GDP growth is expected at 6.6 percent,” the bank said in its Economic Research-2020 Outlook.
“This sort-of ‘dual stimulus’ may act as double insulation from the continuing and anticipated global economic and trade growth uncertainties,” the report said.
UnionBank’s 2020 GDP growth projection was within the growth forecast of the interagency Development Budget Coordinating Committee at 6.5 percent to 7.5 percent from 2020 until 2022.
The DBCC said the comprehensive tax reform program could help ensure a reliable revenue base and, more importantly, enhance the modernization of the economy.
The DBCC, however, reduced the growth forecast for 2019 to 6 percent to 6.5 percent from the previous estimate of 6 percent to 7 percent, amid the lingering trade tension between the US and China that were impacting global growth.
It is composed of the Department of Budget and Management, Department of Finance, the National Economic and Development Authority and the Bangko Sentral ng Pilipinas.
Data showed that in the first three quarters, the GDP growth averaged 5.8 percent, below the low end of the Duterte administration’s target range of 6 percent to 7 percent, weighed down by the delayed approval of the P3.7-trillion national budget for 2019.
The economic management team was aiming for a growth of at least 6.7 percent growth in the fourth quarter to hit the lower end of the target.
UnionBank said economic growth this year was led by an industry sector recovery and the continued strength of the services sector. Agriculture, with meager growth in the first half, recovered in the third quarter.
Private consumption picked up in the third quarter and is strongly believed to be growing further in the fourth quarter as domestic demand rose because of the usual uptick of seasonal spending.
“The delayed 2019 national budget has clearly been the primary cause of the slowdown in government consumption in much of the first half 2019. A slightly significant uptick in Q3 as the government is believed to be gaining needed traction for its spending catch-up plan was touted by economic managers after the 2019 budget was signed in April,” it said.