MANILA, Philippines — Oxford Economics, a United Kingdom-based financial forecasting firm, expects Philippine economic growth to rebound as the government finally spends its P3.7-trillion budget for 2019 after months of delay.
“GDP [gross domestic product] growth slowed sharply to 5.6% year-on-year in the first quarter of the year amid delays in public spending and a substantial drag from net exports,” Oxford Economics director of global macroeconomic research Ben May and economist John Payne said in their report, “Global Macro Themes and Asset Views Chartbook,” for the month of May.
The National Economic and Development Authority (Neda) had estimated that if not for the budget impasse, the first-quarter GDP would have had grown by 6.6%, while the Department of Finance (DOF) had claimed a 6-year high economic expansion of 7.2% during the January to March period if only this year’s appropriations were passed and implemented on time.
To recall, due to squabbles among legislators for “pork” funds, it was only last April 15 that President Duterte approved the 2019 national budget — but after he vetoed P95.3 billion in projects that were not included in his administration’s priorities.
On May 2, Janet B. Abuel, officer-in-charge of the Department of Budget and Management (DBM), issued National Budget Circular No. 577, which served as the implementing guidelines of the 2019 General Appropriations Act (GAA), or Republic Act No. 11260.
Since then, government agencies have already started to spend their respective programmed budgets for the year.
Also, amid easing inflation, Oxford Economics said it would expect monetary policy “to become more accommodative as the BSP [Bangko Sentral ng Pilipinas] is seen cutting rates by 50 bps [basis points] in 2019.”
Two weeks a go, the BSP cut the policy rate by 25 basis points (bps) to 4.5% given slowing inflation as well as economic growth.
Headline inflation declined to a 16-month low of 3% in April, averaging 3.6% during the first four months — already within the government’s 3% to 4% target range.
Last year, the BSP hiked key interest rates by a total of 175 bps as the rate of increase in prices of basic commodities averaged a 10-year high of 5.2% on the back of new or higher excise taxes slapped on consumption under the Tax Reform for Acceleration and Inclusion (TRAIN) Act, skyrocketing global oil prices, and food supply bottlenecks, especially of rice.
However, Oxford Economics warned of upside risks to inflation if global oil prices again spike this year mainly as the US tightens its sanctions on Iran.
Based on its earlier simulations of Brent oil prices jumping to $100 per barrel by year-end, Oxford Economics said: “The hardest hit economies in 2020 are emerging markets such as the Philippines, China, and India.”
(Editor: Alexander T. Magno)