World Bank cuts PH growth forecast

The World Bank sees the Philippines ending 2019 with below-target economic growth of 5.8 percent as global uncertainties coupled with the slower government spending due to delayed budget approval and low absorptive capacity linger on.

In a briefing, senior economist for the Philippines Rong Qian attributed the World Bank’s cut in its 2019 gross domestic product (GDP) growth forecast for the Philippines from 6.4 percent previously to “the impact of the recent global developments on the Philippine economy as well as the sharp slowdown in investment growth in the first half.”

World Bank estimates showed that the country’s GDP growth would likely fall below government targets during the next three years—2019’s will be lower than the 6-7 percent goal; the projected 6.1 percent for 2020 will be below the 6.5-7.5 percent target, and the forecast for 2021 of 6.2 percent will be lower than the 7-8 percent target range.

Qian said the 5.5-percent GDP growth posted in the first semester was the slowest in eight years, pulled down by “a rapid deceleration in investment growth.”

To recall, the government underspent P1 billion on public goods and services monthly from January to April as it operated using reenacted 2018 appropriations because the two houses of Congress earlier squabbled over alleged “pork” funds ahead of the May 13 midterm polls.

President Duterte signed the P3.7-trillion 2019 national budget only in mid-April.

The ban on new infrastructure projects before the elections also hampered public investment, Qian said.

“Investment dragged down growth in the second quarter of 2019, reversing the strong investment push from a year earlier. Private investment activities also slowed given weaker external demand, uncertainties derived from [the US-China] trade war, and from the ongoing corporate tax reform that might have caused some private investment to postpone,” Qian said.

Outside the Philippines, Qian said “advanced economies are all showing sign of growth slowing down with increasing risks of a recession,” citing for instance manufacturing contraction in the United States, Europe and China.

Here at home, Qian said that while the government was already fast-tracking big-ticket infrastructure projects to speed up disbursements, there were still implementation challenges that might prevent a full catch-up.

Qian told reporters that agencies and local government units (LGUs) were unable to immediately start procurement—a long process—right after budget approval due to absorptive capacity issues.

The two major infrastructure agencies—the Departments of Public Works and Highways and of Transportation—were observed spending the same levels of their increasing budgets, which meant that while they were disbursing more in terms of  project cost, it was taking them time to use their entire budgets, Qian added.

Also, the private sector had been having difficulty catching up as the accumulation of projects could not be all served by the construction industry given limited capacity and human resources, she said.

“Resuming public investment is needed to regain growth momentum in the short run, while fast-tracking implementation of game-changing reforms would accelerate inclusive growth,” she said.