ING Bank Manila senior economist Nicholas Mapa. (File photo courtesy of Mr. Mapa)
MANILA – An economist at ING Bank remains optimistic about an above 6 percent growth for the Philippine economy this year due to interest rate cuts and the government’s spending plan.
In a report Monday, ING Bank Manila senior economist Nicholas Mapa expects better domestic performance in the second half of this year on account of the “reinvigorated household spending” and the government’s catch up plan.
In the first quarter of the year, growth, as measured by gross domestic product (GDP) slipped to 5.6 percent from quarter-ago’s 6.3 percent, which authorities attributed to delays in the approval of this year’s national budget, which, in turn, prevented the government to spend according to plan.
The government’s PHP3.7 trillion national budget for the year was signed only last April.
The Bureau of the Treasury (BTr) on Monday reported that revenues in the first half this year rose 9.71 percent year-on-year to PHP1.547 trillion while expenditures contracted by 0.83 percent to PHP1.59 trillion.
This resulted to the 77.91 percent decline in the budget gap to PHP42.6 billion from year-ago’s PHP193 billion.
Last June alone, budget deficit amounted to PHP41.8 billion, 22.93 percent lower than the PHP54.3 billion in the same period in 2018.
Revenues amounted to PHP233.9 billion, 4.32 percent up year-on-year, while spending went down 0.99 percent to PHP275.7 billion.
Mapa noted that even after the approval of the national government’s budget for the year last April and the lifting of the election ban last June government spending went down by about 2.3 percent year-on-year compared to the second quarter of 2018.
“Despite the government’s best efforts to implement “catch up spending”, the projected misstep coming from the government spending side coupled with possible handicapped capital formation could mean 2Q GDP struggles to get past six percent again,” he said.
The economist noted that the second half of the year “provides some hope however for faster growth to close out the year with reinvigorated household spending seen to be joined by a hoped for resurgence in capital formation (as BSP cuts rates further) and resurrected government spending as the administration retains their ambitious deficit target of 3.2 percent of GDP for 2019.”
“If all three sectors begin to hum once more, the Philippines could still hope to achieve escape velocity and finish the year with growth in the lower-end of the government’s 6 to 7 percent growth target,” he added.
Last May, the Bangko Sentral ng Pilipinas’ (BPS) policy-making Monetary Board (MB) slashed the central bank’s key rates by 25 basis points on sustained decline of domestic inflation rates.
BSP Governor Benjamin Diokno indicated more cuts in the central bank’s key rates in the coming months but the said timing will depend on several factors like the July 2019 inflation rate, which the Philippine Statistics Authority (PSA) is scheduled to report on August 5, and on the domestic economy’s second quarter output, to be reported by PSA on August 8. (PNA)
