Economic growth projections have been scaled down across the board following the slice of humble pie served to the government as data this week showed lower spending as the main drag on output in third quarter output.
Growth may slump to its slowest since 2011, projections showed, with hopes of hitting the state’s target now virtually out of the question.
“Questions remain about the government’s procurement problems as well as the delayed projects due to the Disbursement Acceleration Program (DAP) controversy earlier this year,” DBS economist Gundy Cahyadi said in a note on Friday.
On Thursday, the government reported that the economy grew by 5.3 percent, the slowest annual growth since 2011. Quarter on quarter, the economy was at its most sluggish since 2009. Growth for the quarter missed all analysts’ projections.
Economic managers commented following the report that achieving the growth target for the year of at least 6.5 percent would be a “big challenge.” To hit this goal, the economy would have to grow by at least 8.2 percent in the October-to-November period—a rate of expansion not seen in decades.
Last year, the economy expanded by 7.2 percent, which followed a 6.8-percent surge the year before.
HSBC’s Trinh Nguyen traced the slowdown to a drop in imports, which was a symptom of poor infrastructure that held back the economy. HSBC’s forecast, at 5.7 percent, was the closest among banks that track and project gross domestic product (GDP) data.
She said the bank was still optimistic over the economy’s prospects over the long term, given the country’s young economy. HSBC said this should translate into increased domestic consumption as more young people start making money.
Despite the rosy outlook, growth of more than 7 percent would be hard to sustain, Nguyen said, unless the government gets to work on building more roads and other infrastructure to resolve bottlenecks. By 2016, the government wants to drive growth to 8.5 percent, which would be the highest on record.
Like DBS, HSBC sees full-year growth falling short of 6 percent.
In a separate report, Maybank Kim Eng, a stockbrokerage firm, said it was cutting its growth forecast for the Philippines to 5.9 percent for 2014 from a previous forecast of 6.7 percent. The firm said the reduced forecast came amid the expectation that government spending would not recover until next year.