The United Nations Economic and Social Commission for Asia and the Pacific (Unescap) expects the Philippine economy to grow by 6.5 percent this year despite slowing growth across the region amid trade tensions between the United States and China.
In the Asean, the gross domestic product (GDP) growth forecast for the Philippines was exceeded by Myanmar’s 7.2 percent, Cambodia’s 7 percent, Laos’ 6.8 percent and Vietnam’s 6.7 percent, according to Unescap’s flagship “Economic and Social Survey of Asia and the Pacific 2019: Ambitions beyond growth” report which was released on Thursday.
Unescap’s updated growth forecast for the Philippines was higher than last year’s actual GDP growth of 6.2 percent and in the midrange of the government’s downgraded 6-7 percent target. It is, however, lower than the 6.9 percent projection in its 2018 flagship report.
To recall, the Cabinet-level Development Budget Coordination Committee (DBCC) last month slashed its GDP growth target for this year to 6-7 percent from 7-8 percent previously as the government operated on a reenacted budget in the first quarter, limiting spending on public goods and services.
The Department of Finance said last week that in the first two months of the year, the government was unable to disburse P43.7 billion for its priority programs and projects, including infrastructure, as the impasse on the proposed P3.757-trillion 2019 national budget dragged in Congress. The 2019 budget is now up for President Duterte’s approval.
In 2020, Unescap expects the Philippine economy to grow slightly faster at 6.6 percent, which is also within the government’s downgraded 6.5-7.5 percent target range for next year.
After headline inflation hit a 10-year high of 5.2 percent last year, Unescap sees an easing in the rate of increase in the prices of basic commodities, projecting an average of 4 percent this year and 3.5 percent next year, returning within government target range of 2-4 percent.
Last year’s high inflation episode came on the back of higher excise taxes slapped on consumption under the Tax Reform for Acceleration and Inclusion (TRAIN) Act, food supply bottlenecks and skyrocketing global oil prices.
Across developing countries in Asia-Pacific, Unescap projected average GDP growth to slow to 5 percent in 2019 and 5.1 percent in 2020 from 5.3 percent last year.
“Export-oriented sectors face headwinds from weaker demand in Europe and possibly the United States, as well as the uncertainty over US-China trade tensions,” Unescap said, adding that its earlier estimates showed that “threatened tariffs could cause a net loss of at least 2.7 million jobs in the region.”
Unescap was nonetheless optimistic as “compared with 2018, countries in the region may now have greater monetary policy space to support the economy, given the pause in monetary policy normalization in the developed world and relatively stable global oil prices.”