PHILIPPINE economic growth will finish within target after all in 2019, as government spending—the main reason for the lackluster gross domestic product (GDP) expansion in the first half of the year—was able to recover losses toward year-end.
In a recent commentary about government spending, ING Bank Manila economist Nicholas Mapa said they are forecasting a 6.6-percent growth for the fourth quarter of 2019, after data came out that government spending was up 22.4 percent in November.
“The government continued its spending efforts to make up for lost time, with November expenditures up 22.4 percent. The budget deficit hit P60.9 billion as the growth in spending outpaced revenue collections, which was up [by] 17 percent from the same period last year,” the economist said.
The local government’s spending almost ground to a halt in early 2019 as the legislators were unable to pass a budget on time. This took a toll on the country’s GDP numbers, which slumped to 5.6 percent in the first half of 2019.
“So far, spending in the fourth quarter of 2019 posted 11.7-percent growth, keeping hopes alive for a strong fourth-quarter GDP finish for the Philippines,” Mapa said. The government’s target for the year is to grow the economy by 6 percent to 7 percent.
The economist also said other factors are shaping up to support a renewed growth by the end of the year.
“Consumption activity should remain robust with inflation subdued, all the more powered by the more than 8-percent pickup in overseas Filipino remittance flows. Two months of decent car sales growth coupled with a resumption in construction activity points to revitalized investment activity as the sector recovers from two straight quarters of negative growth as Diokno dials back the 2018 rate hike cycle,” Mapa said.
In 2019, the Bangko Sentral ng Pilipinas—led by BSP Governor Benjamin Diokno—let a series of rate cuts a year after his predecessor, the late BSP Governor Nestor Espenilla Jr. moved to hike rates in 2018 to control inflationary pressures.
Diokno, often dubbed as a “progrowth” central banker, also assured the markets that there will be “at least” 50 basis points more of rate cuts in the coming year.
Image credits: David Carillet | Dreamstime.com