IMF cuts two-year growth forecasts for PH

by Ben O. de Vera, Philippine Daily Inquirer, Jul 26, 2019

No thanks to the delayed implementation of the 2019 national budget and the trade tensions between the United States and China, the International Monetary Fund has slashed by half a percentage point to 6 percent its growth forecast for the Philippines for this year.

“The downward revision mainly reflects weaker-than-expected external demand and weaker-than-expected public investment, partly due to the delayed approval of the 2019 budget,” IMF resident representative in the Philippines Yongzheng Yang said late Wednesday, in his response to the Inquirer’s e-mailed questions about the Washington-based multilateral institution’s World Economic Outlook (WEO) Update report released Tuesday night.

Based on this report, the IMF lowered its 2019 growth outlook for “Asean-5”—which groups the Philippines, Indonesia, Malaysia, Thailand and Vietnam—to 5 percent from 5.1 percent while it projected global economic expansion slowing to 3.2 percent from 3.6 percent last year and 3.8 percent in 2017. The slowdown was attributed to the trade tensions between the United States and China.

In April, the IMF projected a 6.5-percent growth in the Philippines’ gross domestic product (GDP).

Its updated 2019 Philippine growth forecast fell to the low end of the government’s downgraded 6-7 percent target range for the year.

First-quarter GDP growth skidded to a four-year low of 5.6 percent mainly due to underspending of P1 billion a day on public goods and services during the start of the year as the government operated using reenacted 2018 appropriations.

President Duterte signed the P3.7-trillion 2019 budget only on April 15 as the two houses of Congress earlier squabbled over “pork” funds.

For 2020, the IMF also downscaled its GDP growth forecast for the Philippines to 6.3 percent from 6.6 percent previously.

“These revised forecasts [for the Philippines] are still among the highest in the region, and growth will continue to be driven by strong domestic demand,” Yang said.

The regional macroeconomic surveillance organization Asean+3 Macroeconomic and Research Office (Amro) also cut its 2019 and 2020 growth forecasts for the Philippines to 6.3 percent and 6.5 percent, respectively.

In an e-mail to the Inquirer late Tuesday, Amro said the downward revisions were “due to a gloomier global growth prospect and a sharp slowdown in the first quarter of 2019 of the Philippines’ economy… due partly to the delay in the budget approval which constrained government spending, in addition to the weakening external demand.”

“Looking ahead, economic growth is expected to recover significantly, as the government started to ramp up spending and ease monetary policy,” Amro told the Inquirer.

Also this month, Manila-based Asian Development Bank (ADB) reduced its 2019 growth forecast for the Philippines to 6.2 percent from 6.4 percent previously, citing the same reasons as the IMF and Amro.

The ADB’s updated GDP growth projection for the Philippines matched the actual 6.2-percent expansion posted last year, the slowest in three years.