ECONOMISTS on Thursday gave a bleak economic growth outlook for the second half of the year primarily due to the slowdown in government spending and decline in the country’s dollar earners.
Citing the latest projection of the Ateneo Center for Economic Research and Development (Acerd), former Socioeconomic Planning Secretary Cielito Habito said they project GDP growth in the next six months to only reach 5.6 percent—lower than the 6 percent GDP target of government economic managers for the entire 2019.
“It is very hard to find any reason to expect a rebound in the second quarter,” Habito said during his presentation at the Ateneo Eagle Watch Forum in Makati City on Thursday.
Slow progress
Habito, who is also a senior fellow of Acerd, blamed this on the low absorptive capacity” of the government’s two main infrastructure agencies—Department of Public Works and Highways (DPWH) and the Department of Transportation (DOTr).
No less than the Commission on Audit (COA), the economist said, has flagged both agencies for their slow utilization of their budget for their infrastructure projects.
For 2017, he said DPWH only spent 34 percent of its budget, and DOTr, only 26 percent.
Acerd Director Alvin Ang said this was already reflected in the slow completion of the government’s 75 big-ticket infrastructure projects under its Build, Build, Build (BBB) program, which would have injected P2.2 trillion into the economy.
He said only 2 percent of the said amount has been absorbed in the economy from two BBB projects, which have been completed, and 9 others that are going through construction.
Tax uncertainty
Habito noted it is crucial for the government to increase its spending since it is currently one of the main drivers of economic growth, especially with the dipping inflows of foreign direct investments (FDI).
During the first quarter of 2019, FDI inflows slowed to 1.94 percent from 2.29 percent in the same period last year.
On Wednesday, the Bangko Sentral ng Pilipinas (BSP) reported that for the month of May, FDI inflow was as it lowest in the last four years.
The investment decline, Habito said, might be due to uncertainty from the Tax Reform for Attracting Better and High-quality Opportunities (Trabaho) bill, now known as the Corporate Income Tax and Incentive Rationalization Act (Citira) bill.
“The threat to rationalize fiscal incentives has really sent jitters down the spines of many, especially in the economic zones,” Habito said.
Remittance-related
Further dampening economic growth, Habito noted, is the decline in household consumer spending despite the prevailing low inflation and interest rate.
He theorized this may be related to the decline in the dollar remittances from overseas Filipino workers (OFW). “While there was 20-percent annual growth in the last decade, now it is only 2.4-percent annual growth,” Habito said.
(See related story on page A1, “$2.3-B June remittance biggest drop in a year.”)
Ang said the situation could further worsen in the coming years especially because of the shifting nature of OFWs going abroad.
“From highly paid professionals, most OFWs who are deployed abroad are now low-skilled,” Ang said.
Habito said they hope the trend will be reversed if inflation remains low and BSP reduces interest rates.
“This would hopefully perk up consumer spending,” Habito said.