THE local economy likely regained speed in the last quarter of 2019, a local economist said, as both government spending and household consumption likely peaked toward the end of the year.
In a recent commentary on the local economy, Security Bank economist Robert Dan Roces said the economy grew the strongest in the last three months of the year, as problems in inflation and government spending were already solved.
In the first half of 2019, the economy was affected because of the government’s inability to pass the budget on time, thereby halting disbursement for projects on infrastructure and construction.
Inflation was also still relatively elevated coming from its peak in end 2018 when inflation accelerated above target range due to rice and oil price issues.
“Our GDP forecast for Q4 2019 is 6.6 percent. Capital formation meltdown was what really hurt us in the past quarters, plus delayed spending due to a delayed budget. With inflation returning to the 2 to 4 percent central bank target range in December and the reserve requirement [RR] cuts lending increased liquidity, capital formation looks better for the quarter. This plus household consumption that was higher especially in the holiday seasons,” Roces said.
For 2020, Roces said he expects inflation to remain within the target range save some bump to the consumer price index (CPI) in the first months due to Taal Volcano’s eruption that affected industries in South Luzon.
“We are still optimistic on growth on the back of a double dose of stimulus from the timely passage of the 2020 budget and the extension of the validity of the 2019 version; we expect the BSP to continue with its current accommodative track to 1) reduce interest rates with a 25 bps cut within the first quarter, and 2) further reduce the RR over the next couple of quarters with at least 200- basis-point cut for 2020,” the economist said.
Philippine National Bank (PNB) economist Jun Trinidad earlier expressed his worries about Taal eruption’s effect on food prices, particularly on chicken, hogs and fish since Region 4A—the region most affected by the calamity—is a significant contributor to local production of livestock.
Trinidad said the region is the second-largest regional producer of live chicken, comprising 87,000 metric tons out of the total 429,000 in the third quarter of 2019.
Initial damage estimates by government agencies was already P74.5 million worth to agriculture in the region, while 6,000 fish cages may also be at risk due to the high sulfur content from the eruption.
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