S&P slashes PH growth projection anew to 6.1%
Credit to Author: MAYVELIN U. CARABALLO, TMT| Date: Wed, 26 Jun 2019 16:30:24 +0000
S&P Global Ratings reported on Wednesday that it further reduced its Philippine growth forecast for 2019 to 6.1 percent from 6.3 percent, citing lower first-quarter expansion, state spending for infrastructure and an accomodative monetary policy as reasons for the revision.
The debt watcher’s revised outlook for the country’s economy is its second this year, with the previous figure itself a downward adjustment for the initial 6.4 percent.
The latest projection is higher than last year’s actual growth of 6.2 percent and falls near the lower end of the government’s downwardly revised 6.0-7.0 percent target.
S&P said the 5.6-percent gross domestic product (GDP) growth posted in the first quarter was lower than expected on account of the delay in passing this year’s national budget, as well as weak external demand.
Despite this, it noted that the recent drop in the jobless rate indicated that the labor market “still appears strong.”
Unemployment fell to 5.1 percent in April from 5.5 percent in the same month last year — equivalent to 2.286 million out-of-work individuals, compared with 2.360 million previously — according to the Philippine Statistics Authority’s latest Labor Force Survey.
“This could provide support to the private domestic economy to offset some of the headwinds from trade and the negative fiscal impulse in the first half of 2019,” S&P said.
A dispute between Congress’ two chambers over alleged insertions resulted in the four-and-a-half-month delay of the passage of this year’s budget. This forced the government to run on last year’s budget, limiting it to spend for items detailed in the 2018 outlay and not on programs and projects supposed to be implemented this year.
“We continue to expect GDP growth to come in at the low end of the 6-6.5 percent range in 2019, with a likely resumption of the infrastructure build in the second half of the year to bring the fiscal impulse for the year to around neutral after being negative in the first half of the year,” the debt watcher added.
Earlier, the country’s economic managers unveiled their “catch-up plan” that set an infrastructure spending target of P792.97 billion for the second to fourth quarters after actual infrastructure spending reached P207.2 billion in the first.
“We also expect BSP (Bangko Sentral ng Pilipinas) to maintain its easing bias this year, supporting growth, as inflation [is likely to] stay benign, especially compared to last year’s spike,” S&P also said.
The central bank started easing its monetary policy settings on May 9, but decided to take a “prudent pause” on June 20 by keeping the overnight borrowing, lending and deposit rates remaining at 4.50 percent, 5.00 percent and 4.00 percent, respectively.
Despite the pause, monetary authorities cut their 2019 inflation forecast to 2.7 percent from 2.9 percent, and their 2020 projection to 3.0 percent from 3.1 percent.
“Risks to external financing and exchange rate volatility are back on the radar as trade tensions reescalate,” S&P said.
The credit rater stressed in particular that spillovers of the trade dispute to the Philippine electronics sector could also be larger than it anticipated at least in the short run.
“Domestically, a resurgence in inflation from food or oil prices remains possible and could weigh on the consumption recovery and the ability of BSP to ease at a time when the fiscal impulse was already negative in the first half of the year,” it warned.
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