The Asian Development Bank on Wednesday reduced its 2019 growth forecast for the Philippines to 6 percent from 6.4 percent, citing the impact to the economy of global uncertainties and the delayed approval of the national budget.
It also reduced the 2020 growth forecast to 6.2 percent from the previous estimate of 6.4 percent based on the latest update of its Asian Development Outlook report.
The multilateral lender said the lower growth estimates for the Philippines were caused by the slowdown in domestic investment in the first half after the budget delay disrupted public expenditure particularly on infrastructure.
President Rodrigo Duterte signed the P3.7-trillion national budget for 2019 only in April after months of impasse between the two houses of Congress.
The ADB, however, said the government’s catch-up plan would boost the economy in the second half especially with the implementation of big-ticket infrastructure projects under the “Build, Build, Build” program.
“The recovery in public spending should also boost private consumption which is currently well-supported by steady overseas workers’ remittances, moderate inflation and low unemployment,” ADB country director for the Philippines Kelly Bird said.
Global debt watcher Fitch Ratings earlier kept its growth forecast for the Philippines this year at 6.1 percent, saying that growth was expected to improve in the second half following a weak first half.
Fitch said in a report titled “APAC Sovereign Credit Overview 3Q19” that economic growth would improve modestly in the second half.
“Growth was weighed down [in the first half] by the delay in budget implementation and a weak external environment. The agency is maintaining its full-year 2019 growth forecast of 6.1 percent, continuing to place the Philippines among the region’s fastest-growing economies,” Fitch said.
“However, we expect weaker global growth and escalating US-China trade tensions to prevent a stronger pickup in 2020 and 2021, and for growth to remain around 6.3 percent,” it said.
Economic growth in the second quarter slowed to a four-year low of 5.5 percent from 5.6 percent in the first quarter and 6.2 percent a year ago, weighed down by the El Niño dry spell, rising protectionism in advanced economies, delayed approval of the national budget for 2019 and the ban on construction activities in the run-up to the midterm elections in May.
The sluggish and slower-than-expected expansion for the April-to-June period was the slowest since the 5.1-percent GDP expansion in the first quarter of 2015.
This brought the first-half GDP average to just 5.6 percent below the low end of the target range of 6 percent to 7 percent set by the government for the entire year.