IMF slashed 2019 growth forecast for PH to 6%

MANILA, Philippines — No thanks to the delayed implementation of the 2019 national budget coupled with the US-China trade war, the International Monetary Fund (IMF) has slashed by half a percentage point to 6 percent its 2019 growth forecast for the Philippines.

“The downward revision mainly reflects weaker-than-expected external demand and weaker-than-expected public investment, partly due to the delayed approval of the 2019 budget,” IMF resident representative in the Philippines Yongzheng Yang said late Wednesday, in his response to the Inquirer’s emailed questions about the Washington-based multilateral institution’s World Economic Outlook (WEO) Update report released Tuesday night.

Last April, the IMF’s gross domestic product (GDP) growth projection for the Philippines was a higher 6.5 percent.

The IMF’s updated 2019 growth forecast fell to the low end of the government’s downgraded 6-7 percent target range for the year.

To recall, first-quarter gross domestic product (GDP) growth skidded to a four-year low of 5.6 percent mainly due to underspending of P1 billion per day on public goods and services during the start of the year as the government operated using reenacted 2018 appropriations.

President Rodrigo Duterte signed the P3.7-trillion 2019 budget only on April 15 as the two houses of Congress earlier squabbled over “pork” funds.

In its WEO Update, the IMF also lowered its 2019 growth outlook for “Asean-5”—which, besides the Philippines, also included Indonesia, Malaysia, Thailand, and Vietnam—to 5 percent from 5.1 percent previously as trade tensions between the US and China took its toll on the global economy.

The IMF sees economic expansion worldwide slowing to 3.2 percent this year from 3.6 percent last year and 3.8 percent in 2017 because of “still sluggish global growth.”

For 2020, the IMF also downscaled its GDP growth forecast for the Philippines to 6.3 percent from 6.6 percent previously.

“These revised forecasts [for the Philippines] are still among the highest in the region, and growth with continue to be driven by strong domestic demand,” Yang said.

This week, the regional macroeconomic surveillance organization Asean+3 Macroeconomic and Research Office (Amro) announced that it cut its 2019 and 2020 growth forecasts for the Philippines to 6.3 percent and 6.5 percent, respectively.

In an email to the Inquirer late Tuesday, Amro said the downward revisions were “due to a gloomier global growth prospect and a sharp slowdown in the first quarter of 2019 of the Philippines’ economy… due partly to the delay of budget approval which constrained government spending, in addition to the weakening external demand.”

“Looking ahead, economic growth is expected to recover significantly, as the government started to ramp up spending and ease monetary policy,” Amro told the Inquirer.

Also this month, the Manila-based Asian Development Bank (ADB) reduced its 2019 growth forecast for the Philippines to 6.2 percent from 6.4 percent previously, citing the same reasons as the IMF and Amro.

The ADB’s updated GDP growth projection for the Philippines for this year matched the actual 6.2-percent expansion posted last year, although it was the slowest rate in three years. /je