US-China trade row to slash PH growth to 6%

Barcelona-based FocusEconomics has cut its 2019 growth forecast for the Philippines to 6 percent mainly due to external headwinds coming from the US-China trade war.

“Economic momentum should gather steam in the second half of the year thanks to fiscal stimulus and more accommodative monetary conditions. Government spending on infrastructure projects should rebound in the second half, which should in turn boost private investment,” FocusEconomics said in a July 16 report.

“The economy appears to have had a resurgence in the second quarter. Exports continued to gradually recover in May and business confidence improved in the quarter. Moreover, government data revealed public spending ramped up in May as policymakers try to achieve their 2019 growth target and make up for lost time from the budget impasse in the first half. Although remittances slowed in April, a rock-solid US labor market should have kept remittances afloat in May and June, while cooling inflation likely boosted consumer spending in the second quarter,” it added.

However, it said the US-China trade dispute and a regional slowdown represent key risks to the outlook.

Also, FocusEconomics added that while the manufacturing sector was again resilient in June compared to regional peers, weak demand and rising inventories signaled growth in the sector could slow in the quarters ahead if new business orders remained lackluster.

Likewise, the business outlook for the third quarter was less upbeat due to expected interruptions from the rainy season, it said.

As such, FocusEconomics lowered its gross domestic product growth projection for the Philippines for 2019 from 6.1 percent previously. —BEN O. DE VERA