MANILA – The Philippine would not be able to hit its growth target this 2018 and next year, despite lowering it GDP forecast for the year, Capital Economics said Friday.
The London-based economic research consultancy cited a numbers of reasons why it believes that the Philippine would have a tough time hitting its growth targets.
“The decision by the government of the Philippines to lower its GDP forecasts for this year, from 7-8 percent to 6.5-6.9 percent was merely a case of bowing to the inevitable given the poor performance of the economy in the first half of the year,” it said in a research paper.
“We are forecasting growth to slow to 6.0 percent in 2019, from 6.3 percent this year,” it said.
Despite lowering its growth forecasts, the Philippines would have a tough time meeting its targets.
“Given the headwinds facing the economy in terms of high inflation, rising interest rates, weaker global demand and political uncertainty, [the Philippines’s own] forecast appears way too optimistic,” Capital Economics said.
Independent economic consultant John Paolo Rivera said it is too early to make conclusions regarding 2019, but noted that the headwinds could contribute to slower economic growth.
“Our government, central bank, policymakers can still implement, hopefully, effective policies to change this forecast. A lot can still happen. The figure might be true for 2018 but not necessarily for 2019,” Rivera said.
The Duterte administration maintained its gross domestic product (GDP) growth forecast for 2019 at 7-8 percent.
The growth forecasts carry near-term implications on the country’s “Build, Build, Build” infrastructure program. The Duterte administration intends to spend P8.13 trillion on infrastructure development during its six-year term that ends in 2022.
“In order to fund its ambitious infrastructure plans the government is targeting a budget deficit of 3.0 percent of GDP next year—which would be the second biggest since the global financial crisis,” Capital Economics noted.
“But if economic growth (and government revenues) come in significantly below target, the deficit would widen markedly,” it said.
The Duterte administration intends to fund its Build, Build, Build program largely with tax revenue and official development assistance.
Right now government debt is just over 40 percent of GDP.
This is low by the Philippines’ own historical standards and relative to other Asian countries, Capital Economics noted.
“As a result, a fiscal crisis is not imminent. But if the deficit continues to widen, questions may start to be raised about the government’s commitment to a responsible fiscal policy,” it said. (GMA News)
