ADB lowers PH growth forecast further

The Asian Development Bank (ADB) has again cut its 2019 growth forecast for the Philippines due to the delayed budget approval that slowed first-half economic expansion, although the Manila-based multilateral lender sees inflation easing faster than earlier expected.

The ADB’s Asian Development Outlook 2019 update report released on Wednesday showed that the growth projection for the Philippines was slashed to 6 percent from the 6.2-percent forecast in July and 6.4 percent in April.

The updated projection nonetheless remained within the government’s downgraded growth target of 6-7 percent for the entire year.

“The downward revision in growth comes from the slowdown in domestic investment in the first half of 2019 mainly caused by the delayed passage of the 2019 national budget, which held back public expenditure, particularly on infrastructure,” the ADB said in a statement.

First-half GDP (gross domestic product) growth slowed to 5.5 percent year-on-year due to the impasse caused by legislators’ squabbles over alleged pork funds that delayed the approval of this year’s P3.7-trillion budget to mid-April 2019.

The government operated using reenacted 2018 appropriations at the start of the year such that it underspent P1 billion a day during the first four months.

Moving forward, the ADB said it expected the government to catch up on spending on public goods and services.

“Public spending should regain traction for the rest of 2019, with the government committed to catching up with its spending plans, especially as new and larger infrastructure projects get underway. The recovery in public spending should also boost private consumption, which is currently well-supported by steady overseas workers’ remittances, moderate inflation and low unemployment,” said Kelly Bird, ADB country director for the Philippines.

As for headline inflation, the ADB expects the rate of increase in prices of basic commodities in 2019 to further ease to 2.6 percent from previous projections of 3 percent in July and 3.5 percent in April.

The ADB said the rosier inflation forecast was on the back of “improved domestic rice supplies following the lifting of quantitative rice import restrictions in February this year.”