CHASING the lower end of the government’s economic growth target for the year is still doable, a local economist said, especially if it lets out a “double dose” of stimulus in the second half of the year.
In a recent assessment of the Philippine economy, ING Bank Manila economist Nicholas Antonio Mapa said despite the dismal gross domestic product (GDP) growth of the country in the first half of the year, the second half is shaping up to be a “different story.”
“The budget delay coupled with the aftershocks from the 2018 BSP rate hike cycle weighed heavily on growth in the first six months of the year but with the tides turning for both these factors, we can expect a substantial pick-up in growth momentum going into 2020,” Mapa said.
“In order to chase 6-percent growth in 2019 and in 2020, the Philippines will be taking out the playbook from the last time global growth took a downturn: by looking to its domestic economy for growth as global headwinds swirl. With stimulus from both the fiscal and monetary side, the Philippines recovery hinges on the double dose of stimulus to get growth back on track,” he added.
Mapa further said that if this “double dose of stimulus” kicks in on time, ING expects a 6-percent growth for 2019 on the back of early returns of a resumption in government spending and a revival of investment activity teaming up with household consumption.
For next year, Mapa forecasts a 6.4-percent expansion.
After the government failed to pass the 2019 budget earlier this year and wreaked havoc on local public spending numbers, it pledged to “catch up” on spending in the second half.
The national government reported a spending growth of 8.78 percent and disbursements hitting 92 percent of the budget as of August against the 86 percent in 2018.
“Given the administration’s resolve to ensure timely passage of the spending bill, ING expects government spending to come back online in the second half of 2019 and bounce back sharply next year, with Congress looking to extend the validity of the 2019 budget for an additional 12 months,” Mapa said.
For the monetary side, Mapa said most of the effects of the BSP’s 175-basis-point hike in 2018 was felt in 2019 due to the lag in the monetary policy’s effectivity on the real economy.
As inflation tames, the BSP recently pulled back this hiking cycle and went on to cut rates and reserve requirement ratio this year under the leadership of BSP Governor Benjamin Diokno.
For 2019, the BSP cut rates thrice to the tune of 75 basis points—a move that will help support the ailing growth of the economy.
“The timely reversal in BSP’s rate hike cycle will look to arrest the slide in our once promising investment-led growth engine of capital formation,” Mapa said.