THE local economy is expected to grow by 6.4 percent this year, but concerns loom for every day that the legislative department fails to fix appropriations issues, experts at a local bank said on Thursday.
In Security Bank Corp.’s Economic Forum, its chief economist Robert Dan Roces said the bank still keeps a 6.4-percent forecast for the country’s gross domestic product (GDP) growth this year, but this number is a wait-and-see stance pending developments in the national government.
Experts raised particular concern about the country’s ongoing budget impasse, as the standoff holds up public funds that are used to fuel further productivity in the country.
Roces said the country’s growth rate can fall to as low as 6 percent assuming that the budget gets passed in April. A full year of no new budget will yield a growth rate of as low as 5.5 percent for the country.
Despite the budget problems, the economist said they remain bullish about local economic prospects as factors to the growth of the country continue to improve in recent months. Among these factors include the improvement in the country’s inflation numbers. Inflation flew past the government’s target last year to reach a peak of 6.7 percent in September and October due mainly to higher prices of rice and oil during the year. This prompted economic managers to make monetary and nonmonetary policy adjustments to bring inflation back to the 2-percent to 4-percent target range.
As of February, inflation fell back to 3.8 percent and is expected to moderate further in the coming months.
Roces said they forecast inflation to hit 3.5 percent this year, but potential headwinds loom, such as the onset of El Niño, weather disruptions and rising global oil prices.
Security Bank President Alfonso Salcedo Jr. also said infrastructure spending—which has also been affected by the budget issue—will be crucial to the development of the country in the medium term.
“We are in the middle of an economic milestone that will benefit the Philippines in the medium and long run. With 28 big-ticket projects expected to be completed by 2022, the country is at the cusp of the golden age of an infrastructure boom,” Salcedo said.
While infrastructure spending continues to take a backseat to the Upper and Lower House budget standoff, Roces said early halts to infrastructure spending has already been factored in by economic managers and will not likely put an immediate drag to the economy as it coincides with the election-related spending ban.
“What is crucial for them now is to have the budget passed after the elections. The trajectory will not change very soon; they are probably going to double down on spending for this year. We do hope it gets passed because a lot of stuff depends on that,” Roces said.
Image credits: Nonie Reyes