GDP target now out of reach

MANILA, Philippines—Out of reach.

This now describes the government’s economic growth target for the year following the release of disappointing third-quarter numbers on Thursday.

State spending will have to improve sharply in the remaining months of the year, and even then, an unprecedented expansion will have to be achieved to hit the bottom end of the Aquino administration’s goal.

“Government spending is a wild card,” ING’s economist in Manila Joey Cuyegkeng said in a note to clients on Thursday following the release of the third-quarter national income accounts. “Optimism of a rebound in spending is fading.”

The Philippine Statistics Authority (PSA) reported that the Philippine economy grew by 5.3 percent, the slowest pace since 2011. This brought down the average for the nine months to September to 5.8 percent or significantly behind the target range of 6.5 to 7.5 percent.

To hit the low end of the target range, the economy would have to grow by at least 8.2 percent, according to officials. High consumer prices put a drag on domestic consumption during July to September.

Missing the target for the year was now all but assured, analysts told the Inquirer.

ING’s Cuyegkeng said the bank was still firming up its numbers but doubted the economy’s ability to grow faster than 6 percent this year. Singapore’s DBS bank issued a similar statement, which was echoed by Metropolitan Bank & Trust Co.

DBS economist Gundy Cahyadi said the drag of weak government spending on growth was “much more than what we expected.”

Government seemed “stumped” on how to catch up with the execution of this year’s fiscal program, ING’s Cuyegkeng said. This followed a Supreme Court ruling that annulled the administration’s Disbursement Acceleration Program (DAP), which diverted savings within the year to faster-moving projects.

Officials might also be tightening the purse string to ensure the graft-free implementation of projects and programs. “I am not as optimistic about a surge in government spending but I would wait for the October fiscal performance,” Cuyegkeng added.

In the nine months to September, the state’s budget stood at a deficit of P31.1 billion, or way behind the ceiling of P266.25 billion for the entire year—indicating a sharp slowdown in spending.