MANILA -- An economist forecasts further acceleration of the Philippine economy’s growth to as high as 7 percent in the first quarter of 2020 due to the early approval of this year’s national budget that will help boost infrastructure spending.
As of the third quarter of 2019, domestic growth, as measured by gross domestic product (GDP), averaged at 5.8 percent, lower than the government’s 6-6.5 percent target band.
It slowed from 6.3 percent in the last quarter of 2018 to 5.6 percent and 5.5 percent in the first two quarters last year due to the impact of the delay in the approval of last year’s national budget, which was only signed into law on April 15.
This year’s national budget was signed into law last Jan. 6, and Rizal Commercial Banking Corporation (RCBC) chief economist Michael Ricafort said this timely approval will further lift state spending, which accounts for about 11 to 12 percent of GDP.
In a reply to an e-mail from PNA, Ricafort said base effects of the weaker output in the first quarter of 2019 will also boost domestic expansion this year, along with faster infrastructure spending, the extension of the validity of some 2019 national budget items to this year, and the one-year validity of the cash-based budget this year.
He said these factors may offset the impact of “damage/disruptions brought about by the Taal volcano eruption (that could reduce GDP growth by less than 0.1 percentage point as of this point) and despite geopolitical risks largely due to the limited pockets of tensions between the US and Iran.”
The eruption of the Taal Volcano in Batangas, which started last Sunday, negatively impacts on tourism and business activities in areas like Taal and Tagaytay, Cavite, he said, but added the impact depends on how long the calamity will persist.
Aside from government spending-related factors, Ricafort said other growth drivers this quarter include lower inflation and interest rates, sustained growth of remittances from overseas Filipino workers (OFWs), higher revenues from the business process outsourcing (BPO) and the Philippine offshore gaming operators (POGO) sectors, tourism receipts, foreign investments, and strong employment data.
These factors, he said, boost consumer spending which accounts for about 70 percent of the domestic economy.
“Some pick up in loan growth could also support faster growth in investments/capital formation (which accounts for about 30 percent of GDP),” he added.
Meanwhile, Ricafort said the rate of price increases this month may increase to 2.8 percent from 2.5 percent last December due to base effects, the volatility of oil prices, and geopolitical concerns overseas, and the impact of the Taal Volcano eruption on some economic activities.
The inflation rate in January 2018 reached 4.4 percent.
Ricafort further said the price of oil in the international market registered a temporary pick-up after the US-Iran issue started last Jan. 3 but declined to almost one-month lows when tensions eased last January 8. (PNA)
