‘Economy to slow in 2019’
Credit to Author: ANNA LEAH E. GONZALES| Date: Wed, 08 May 2019 16:24:35 +0000
PHILIPPINE economic growth is expected to slow this year, with risks to it primarily driven by government underspending and tight liquidity in the financial market, economists say ahead of the release of first-quarter gross domestic product data today.
During the Security Bank Economic Forum in Makati City on Wednesday, economist and Foundation for Economic Freedom (FEF) President Calixto Chikiamco said 2019 growth “should be between 5.8 percent and 6.2 percent.”
The economy grew by 6.2 percent in 2018, down from 6.7 percent the year before, and fell short of the government’s 6.5-to-6.9-percent revised downward target for that year.
“Headwinds include the budget delay; export slowdown; higher interest rates relative to 2018; higher oil prices; increasing current account deficit; El Niño; and other problems, from measles outbreak to [the] current water shortage,” Chikiamco said.
Low agricultural productivity and the undiversified export base would continue to weigh on growth, he added.
Global political events, including Brexit, the ongoing trade war between the United States and China, and the global ecobomic slowdown would also affect the Philippine economy, according to him.
He pointed out, however, that this year’s election spending and the continued growth in the business-process outsourcing sector are expected to drive growth.
In the next few years, Chikiamco said, the Philippines is expected to continue posting strong growth, which should “be between 5 to 7 percent,” depending “on further economic reform measures.”
He urged the government to continue implementing reforms to achieve inclusive growth.
“There are still structural problems, and we have a lot of work to do especially in reducing poverty,” the FEF chief said.
‘Already happening’
Also on Wednesday, Philippine National Bank (PNB) chief economist Francisco Trinidad Jr. told a roundtable that “fiscal underspending risk is already happening, with disclosures made by senior finance officials that not just the budget deficit is below target, but we are losing P1 billion a day in terms of spending.”
Latest available data showed that the first-quarter budget shortfall of P90.245 billion was 40.6-percent lower than the P152.171 billion posted a year ago. It was also 52 percent or P98.108-billion lower than programmed.
This was blamed on the delayed approval of the 2019 national budget, which forced the government to operate on last year’s budget since the start of 2019 until April, when President Rodrigo Duterte signed it.
“The worry I have with the budget approval delay is that we may not see a strong or robust fiscal stimulus,” Trinidad said.
He pointed out that budget delays, coupled with the institutional constraints on spending because of this year’s midterm elections, meant that the government would not be able to spend its programmed funds for infrastructure.
“Missing a strong fiscal stimulus makes us very hostaged to a global macro slowdown,” he said.
Trinidad expects the economy to grow by 6.4 percent, marginally up from last year’s 6.2 percent, but within the government’s downwardly revised 6.0-to-7.0-percent target for 2019.
“If inflation is benign and you have that particular risk facing us and the challenge offshore, maybe its timely for some monetary accommodation,” he said.
“And the initial one I see would be liquidity injection by way of 1-2-percent bank reserve cut because the second risk I see is that domestic liquidity backdrop is tightening,” the economist added.
He noted that this was evident in the latest available data, which showed that credit and liquidity growth have slowed to single digits.
To address this, Trinidad said monetary authorities were likely to implement a 1-2 percentage points cut to banks’ reserve requirement at their Monetary Board today.
They are also likely to cut interest rates by 50-75 basis points starting in the second half of the year, he added.
With a reports from MAYVELIN U. CARABALLO
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