Nomura projects ‘marginal’ GDP growth for April-June
Credit to Author: MAYVELIN U. CARABALLO, TMT| Date: Sun, 30 Jun 2019 16:10:33 +0000
PHILIPPINE economic growth likely grew to 5.8 percent in the second quarter on the back of moderated public spending and investments, according to Japan’s Nomura Securities Ltd.
“The government’s monthly fiscal surpluses in April and May support our Q2 (second quarter) GDP (gross domestic product) growth forecast of 5.8 percent, which is only a marginal improvement from the growth of 5.6 percent in Q1 (first quarter),” Nomura economist Euben Paracuelles said in a report released over the weekend.
“Our Q2 forecast takes into account government spending and total investment growth that are still moderating, but by less than in the Q1,” he added.
The fourth-and-a-half month delay in the passage of the 2019 national budget resulted from a dispute between the Senate and the House of Representatives over alleged insertions. This forced the government to operate 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.
The government blamed the delayed budget on the P809-million budget deficit for the first five months of the year, which is 99.4 percent lower than the P138.7 billion in the same period in 2018.
Besides domestic factors, Paracuelles also said additional headwinds to growth might come from escalating United States-China trade tensions, which are hurting exports across the region.
“This implies GDP growth in H1 (first half) is tracking well below the government’s full year 6-7 percent target, which has already been scaled down from 7 to 8 percent earlier,” he added.
That said, the economist stressed that Nomura continues to believe that the macro policy mix in the country “will become much more expansionary” for the rest of the year.
According to him, the relatively slow fiscal spending is likely to prompt authorities to intensify the implementation of “catch-up” spending plans, whose success would be more likely in the second half of the year.
In May, the country’s economic managers revealed their “catch-up plan” that set an infrastructure spending target of P792.97 billion for the rest of the year after actual infrastructure spending reached P207.2 billion in January to March.
“The initially slow rebound in fiscal disbursements should also provide a justification for [the] BSP (Bangko Sentral ng Pilipinas) to resume policy rate cuts shortly, focusing on supporting growth further while the inflation outlook remains benign, as we expect headline CPI (consumer price index) inflation to fall well below the mid-point of the 2 to 4 percent target in coming months,” Paracuelles 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 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.
Nomura’s report came after an official from Moody’s Investors Service said economic growth in the second quarter was nothing to “be excited about.”
That official, Moody’s Vice President and Senior Credit Officer Christian de Guzman, told reporters in a briefing last Thursday that the global credit rater based its assessment on the fact the government lost its change to spend in the first five months of the year, due to the budget impasse and the election ban.
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