The Asean+3 Macroeconomic and Research Office (Amro) has again cut its 2019 growth forecast for the Philippines, even as the regional macroeconomic surveillance organization expects the economy to bounce back in the second half of the year.
“We expect the Philippine economy to expand by 6 percent in 2019 and 6.4 percent in 2020, respectively, marking a rebound from the slowdown caused by the budget delay and spending freeze before the midterm election. However, heightened uncertainties in the external environment could exert further pressures on the Philippines’ growth and prompt financial market volatilities. Policies should be calibrated to address these challenges,” Amro lead economist Siu Fung Yiu said in a statement Friday.
In July, Amro downgraded its gross domestic product (GDP) growth forecast for the Philippines for 2019 to 6.3 percent from the projection of 6.4 percent last May.
The latest 2019 forecast, which was at the lowest end of the government’s 6-7 percent target range for this year, was based on Amro’s preliminary assessment during its annual consultation visit to the Philippines last Sept. 30 to Oct. 9.
To hit Amro’s new projection, the Philippine economy needed to grow by a faster 6.5 percent during the second half.
“Despite a slowdown to 5.5 percent in the first half of 2019, the recent ramp-up in fiscal spending, especially on infrastructure investment, will support stronger economic growth moving forward,” Amro said.
Also, “inflation is expected to continue to stay within the 2-4 percent target range for 2019 and 2020, as global oil prices and domestic food prices are likely to be contained and demand pressure to remain subdued,” Amro added.
“The banking system remains sound with stable capitalization and liquidity. The government’s commitment to prudent fiscal discipline will help contain debt accumulation, while fiscal reforms will continue to improve revenue mobilization capacity,” according to Amro.
Amro urged the Philippine government to “avoid any budget delay in 2020” and advised to carry over some budget items into the proposed P4.1-trillion appropriations for next year if ever the fiscal spending program for 2019 will be missed.
For Amro, “the main short-term risks facing the Philippine economy stem from external sources” such as the US-China trade war and Brexit, which “could also exacerbate the current slowing global economy and raise global market volatilities.”
Here at home, Amro said “policy restrictions” on Philippine offshore gaming operators and the government’s decision to no longer approve new economic zones in Metro Manila “may lead to downward pressures on the property markets.”
“For the longer term, although labor productivity in the Philippines has improved substantially after the global financial crisis, sustaining this trend remains a challenge,” Amro said.