Amid Q1 slowdown, DOF stands by growth forecast

Faster government spending in the second half of the year should help the Philippine economy grow at a faster clip to make up for the slowdown seen in the first months of the 2014.

Finance Secretary Cesar V. Purisima, head of the cabinet’s economic cluster, said the administration would stand by its growth target for the year, set at 6.5 to 7.5 percent.

Several observers, led by the International Monetary Fund (IMF), expect this target to be missed.

“We’re hoping that we have a [better] second half,” Purisima told reporters Friday.

“We will continue to accelerate budget disbursements to make sure we get projects on the ground as quickly as we can,” he said.

The IMF late last month said growth in the second quarter would remain modest due to the slowdown in state spending in May.

Spending recovered in June, pushing back the government to a budget deficit after two months of surplus.

The deficit stood at P62.5 billion, rising more than sixfold from the P8.5-billion shortfall reported in the same period in 2013.

This brought the fiscal position in January to June to a shortfall of P54 billion—up 5 percent year-on-year.

In April and May, the government posted consecutive budget surpluses, which meant it collected more taxes than what it spent on projects and services.

“We’re definitely going to work hard to make sure we catch up,” Purisima said, referring to the state’s spending plan.

For the year, Purisima said, the government will stick to its economic growth target of 6.5 to 7.5 percent. Last year, the economy expanded by 7.2 percent, but growth slowed to 5.7 percent in the first quarter.

The IMF sees the Philippine economy growing by 6.2 percent this year. This projection was downscaled from the previous forecast of 6.5 percent, taking into account the disappointing first quarter performance.

The Philippines, however, is still projected to outperform the rest of Southeast Asia, which is now seen to grow at 4.6 percent. This is slower than the previous projection of 5 percent for the region.

Prospects for global growth were also downscaled by the IMF.

In the multilateral fund’s update to its World Economic Outlook report, the forecast for the global growth was reduced to 3.4 percent from the previous 3.7 percent.  Paolo G. Montecillo