Public spending should regain traction for the rest of 2019, with the government committed to catching up with its spending plans

The Asian Development Bank (ADB) slashed for the fourth time its growth forecast for the Philippines for this year and the next, on account of the slowdown in investment activities as a result of the delayed passage of the 2019 national budget.

The ADB, at the launch on Wednesday of its Asian Development Outlook (ADO) 2019 at its headquarters in Mandaluyong City, said it now expects this year’s growth to end at 6 percent, a revision from the 6.7 percent projected in September 2018, 6.4 percent in April 2019 and 6.2 percent last July.

Meanwhile, the Manila-based multinational lender also cut its growth projection for 2020 to 6.2 percent from 6.4 percent previously.

ADB country director Kelly Bird said the downward revision was due to the slower domestic investment during the first half of the year.

“The delayed passage of the 2019 national budget and ban on public infrastructure spending in the run-up to midterm elections in May 2019 held back public expenditure,” he said.

The government has proposed for P3.8 trillion as expenditures for full-year 2019 but this was only approved by the Congress in April. The national government has since been operating on a reenacted budget prior to its approval.

As a result, the country’s gross domestic product (GDP) during the first quarter of the year plunged to a four-year low of 5.6 percent from the 6.3 percent in the fourth quarter of 2018 and the 6.5 percent recorded in the first quarter of 2018.

Nonetheless, Bird said that it expected a rebound in government spending in the second half of the year, particularly with domestic private consumption holding up well along with supportive fiscal and monetary policies.

“Public spending should regain traction for the rest of 2019, with the government committed to catching up with its spending plans, especially as new and larger infrastructure projects get underway,” Bird said.

“The recovery in public spending should also boost private consumption, which is currently well supported by steady overseas workers’ remittances, moderate inflation, and low unemployment,” he added.

At the same time, the Asian lender revised its inflation outlook for the Philippines for 2019 to 2.6 percent from 3 percent, and to 3 percent from 3.5 percent for next year.

ADB attributed the revised forecast to improved domestic rice supplies following the lifting of quantitative rice import restrictions in February this year.