While the economy is expected to post a growth of above 6 percent in the last two quarters of 2019, economists still believe the country’s gross domestic product (GDP) this year will remain muted at below government targets.
Economists said third quarter growth may reach 6 percent or, at best case scenario, at 6.3 percent. The upward trend may continue toward the October-to-December period, which is usually dubbed the strongest quarter annually.
Ateneo Center for Economic Research and Development (ACERD) Director Alvin P. Ang told the BusinessMirror the primary drag to the economy this year is low investments.
“I expect full year [GDP] to grow 5.7 percent due to lower investments and weak capacities to implement,” Ang told the BusinessMirror.
Ang said the weak performance of exports and imports also played a role in weakening the economy this year. But the “drop in investments” would have a bigger impact on GDP this year, he added.
“Growth will be slower and, most likely, disappointing. Drivers will be investment and government spending. ‘Drag’ will be exports especially electronics and agriculture which can be negative,” former Socioeconomic Planning Secretary Romulo L. Neri also said.
Data from the Philippine Statistics Authority (PSA) showed exports only posted a growth of 0.1 percent, while imports contracted 2.8 percent in the January-to-August period.
Investments, such as those committed to the Board of Investments (BOI), only posted a growth of 126.12 percent in January to August 2019.
However, the P609.04 billion posted in the January-to-August period this year was only 61 percent of the P1-trillion target for the year.
Government spending, meanwhile, was pegged at a total of P2.212 trillion, while it raised P2.091 trillion revenues. The fiscal gap of P120.4 billion, a report from CNN Philippines stated, is not even half of the P282-billion deficit target for the year.
UnionBank Chief Economist Ruben Carlo O. Asuncion also said public infrastructure spending contracted 11.8 percent to P446 billion as of end-August this year from P505.6 billion last year.
It added that government spending only grew 6.9 percent in the second quarter of the year compared to 11.9 percent in the same period last year.
“We believe growth may continue to pick up in the fourth quarter as the Bangko Sentral’s reduction of the triple R earlier in the year start to gain traction, more so if public-sector spending manages to sustain its catch up,” BPI Lead Economist Emilio S. Neri Jr., however, said.
“If so, the [fourth quarter] 2019 print will be an improvement, but probably not enough to nudge the full year performance toward the 6-percent to 7-percent growth goal,” he added.
However, government spending has improved enough for economists such as Nicholas Mapa, senior economist of ING Bank to express confidence that third quarter growth may be better than expected.
Mapa said economic growth may have reached 6.3 percent in the July- to-September period this year. This is mainly due to the recovery from the budget impasse in the half of the year.
He said government outlay grew 17 percent in the third quarter, a rebound from the 2.3-percent contraction posted in the second quarter.
“Capital formation, which saw a meltdown in the second quarter [-8.5 percent] due to the aftershocks from BSP’s [Bangko Sentral ng Pilipinas] aggressive 2018 rate hikes may finally show early signs of recovery and show marginal growth after BSP’s moved quickly to reverse last year’s tightening cycle,” he added.
The economy will also benefit from low inflation as it boosts household consumption. Neri said this will allow the economy to post a 6-percent growth in the third quarter.
He said the economy will also ramp up in overseas Filipino workers remittances growth, as well as double-digit growth in retail loans.
On the production side, Neri said the rebound in the services sectors may have outweighed the drag from agriculture and manufacturing.
“A slight turnaround in public sector fixed capital spending in late Q3 [third quarter] may have cut the drag from the delayed 2019 budget which was largely the reason behind the major collapse in overall capital spending in [second quarter of] 2019.”
Meanwhile, UnionBank’s Economic Research Unit (ERU) expects growth to reach 6.1 percent in the third quarter and 6.4 percent in the fourth quarter.
This will be driven mainly by domestic consumption. The third quarter Consumer Expectation Survey showed that the overall confidence index grew 4.6 percent, the best result since the fourth quarter of 2017.
“Economic growth is expected to have been driven by robust remittances, improving employment, and benign inflation. Improvement in government spending is a critical growth driver. However, ERU still thinks that it will be difficult to reach the set government target,” UnionBank said.
The government through the PSA will be releasing the third quarter National Income Accounts next week.