By Chino S. Leyco
The Asian Development Bank (ADB) lowered this year’s economic growth forecast for the Philippines owing to budget delay while it expects further slowdown in the rate of increase in consumer prices.
Based on the Asian Development Outlook Supplement released yesterday, the ADB revised downward its gross domestic product (GDP) projection for the Philippines from 6.4 percent to 6.2 percent following the lower than expected expansion pace in the first quarter.
In January to March, the economy grew by 5.6 percent, below the government’s target of 6.0 percent to 7.0 percent. The Duterte administration attributed the slowdown on delayed passage of the national budget, which held back public spending by at least P1 billion a day.
Likewise, public construction dropped 8.6 percent during the quarter while growth in government consumption eased to 7.4 percent.
Exports growth of goods and services also slowed as a result of lackluster global trade and the downturn in the electronics cycle during the quarter, the Manila-based lender noted.
“As a consequence of these developments in Q1, the growth forecast is revised down to 6.2 percent for 2019, though maintained at 6.4 percent for 2020,” the ADB said.
“Public investment is expected to rebound in the second half of 2019 following budget approval in April and to pick up next year as more infrastructure projects come on stream. Slowing inflation, low unemployment, and steady remittances will continue to support household consumption,” the bank added.
Meanwhile, the ADB is expecting inflation may further weaken to 3.0 percent this year from 3.8 percent on the bank of declining prices of Filipino’s staple food after the implementation of the rice tariffication law.
“Rice prices have declined on improved supply since the lifting of quantitative restrictions on rice imports in February 2019,” the ADB noted.
“Reflecting lower food prices, the Philippine inflation forecast for 2019 is thus revised down from 3.8 percent to 3.0 percent. The inflation forecast for 2020 is maintained at 3.5 percent with an expected pickup in global commodity prices,” the bank added.
In the first six months of the year, the country’s inflation averaged at 3.4 percent, well within the government’s target of 2.0 percent to 4.0 percent.