’18 GDP growth seen short of gov’t goal

Economic growth likely slowed last year and fell below the government’s downgraded target range as high inflation took its toll on consumption, a major driver of the economy.

Six of seven economists polled by the Inquirer last week expect the gross domestic product (GDP) to have grown below the 6.5-6.9 percent goal and slower than the 6.7-percent expansion in 2017.

The government will report on last year’s GDP growth performance on Thursday.

For the entire 2018, four economists projected an average growth of 6.2 percent: Deutsche Bank’s Michael Spencer, IHS Markit Asia-Pacific chief economist Rajiv Biswas, ING Bank senior economist Nicholas Antonio T. Mapa and University of the Philippines-Los Baños’ Agham Cuevas.

Bank of the Philippine Islands vice president and chief economist Emilio S. Neri Jr.’s forecast was 6.3 percent, while Rizal Commercial Banking Corp.’s Michael L. Ricafort projected 6.4 percent.

Moody’s Analytics economist Katrina Ell’s forecast was 6.5 percent, the lowest end of the government target.

Most full-year 2018 forecasts were lower than the government’s goal even as some economists saw growth in the fourth quarter to have picked up as inflation eased.

Ell said she expected fourth-quarter growth at 6.8 percent year-on-year as “improvement is expected in private consumption after a slump in the third quarter on higher food prices squashing discretionary spending.”

To recall, headline inflation hit the highest level in more than nine years in September and October last year due to skyrocketing global oil prices and domestic food supply bottlenecks that pushed prices higher, especially that of rice.

In the last three months of 2018, imports of goods also accelerated to double-digit level, a consequence of the government’s large infrastructure spending program, Ell said, referring to the administration’s “Build, Build, Build” program.

Ricafort’s fourth-quarter growth forecast was 6.5 percent, while Neri’s was 6.4 percent.

“On the spending side, rapid growth in capital formation is expected to have been sustained as government reported a 40-percent plus year-on-year growth in infrastructure spending. Early signs of a rebound in household final consumption may also be reported as the sharp drops in November and December inflation and the collapse in petroleum prices likely bolstered consumer confidence immediately. Downside risk on the demand side could emanate from sustained weakness in exports and remittances in October and November,” Neri said in a report.

“On the production side, we expect a modest recovery in both agriculture and manufacturing as both benefited from improved weather conditions and the lower cost of petroleum. Improvement in corn output and a rebound in agriculture exports also seem to indicate a small turnaround in overall agriculture and manufacturing performance last quarter,” Neri added.

However, Biswas, Mapa, Cuevas and Spencer expect fourth-quarter GDP growth to have further eased from the third quarter’s three-year low expansion of 6.1 percent.

Biswas projected a 6-percent year-on-year growth during October to December; Cuevas, 5.9-6 percent; Mapa, 5.9 percent; and Spencer, 5.8 percent.

“The pace of economic growth in 2018 was dampened by the slowdown in export growth and a widening trade deficit, as well as the impact of rising interest rates as the Bangko Sentral ng Pilipinas significantly tightened policy rates in 2018 to address rising inflation pressures. In the second half of 2018, the slowdown in global electronics demand also resulted in weakening electronic exports, with declining global electronics orders in recent months signaling further soft electronics exports in early 2019,” Biswas said.

“With inflation accelerating past target and with the BSP rattling off a string of aggressive hikes, growth momentum will undoubtedly begin to take a hit and the slowdown may manifest again in fourth-quarter GDP,” Mapa said in a report.