Q1 growth may slow to 6.1% with delayed gov’t projects — poll

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Metro Manila (CNN Philippines, May 8) — Economic growth likely slowed during the first three months of 2019, with analysts pointing to the delayed passage of the budget which stalled government projects.

A CNN Philippines poll among 15 economists led to 6.1 percent median forecast for first-quarter growth, which would ease from 6.3 percent in the fourth quarter of 2018 and the 6.6 percent pace logged for January-March last year.

This would be the slowest since a six percent climb in the third quarter of 2018, when consumer spending was hurt by rising prices of goods.

The government will release official first quarter data on gross domestic product (GDP) Thursday.

“Q1 GDP may have slid down to 6.1% from 6.3% in Q4 2018, due to the much-delayed approval of the 2019 government budget,” said Emmanuel Leyco, economics professor at the Asian Institute of Management.

President Rodrigo Duterte signed the national budget only in April as the bill languished before Congress over alleged last-minute insertions to the spending plan. Its enactment provides funds for new and continuing government programs and projects after a four-month delay.

READ: Duterte signs 2019 budget, vetoes ₱95.3-B infra projects

“In a year that was supposed to be the biggest government spending binge, five months of underspending will likely take its toll on 1Q (and even 2Q) growth,” added Nicholas Antonio Mapa, senior economist at ING Bank, who gave an even lower 5.9 percent estimate.

The government was eyeing to spend around ₱1 trillion for infrastructure this year.

Mapa added that the series of interest rate hikes introduced by the Bangko Sentral ng Pilipinas last year to combat inflation likely stood as a road bump for investments.

The analysts were of the view that household spending has rebounded coming from its slowdown late last year, but are saying that this is unlikely to cover for the slowdown in public investments.

“Household consumption may have slightly picked up due to the continued decline of price levels in the economy. However, this recovery may have not been enough to buoy economic growth higher than the same period last year,” said Ruben Carlo Asuncion, chief economist at the Union Bank of the Philippines.

The Duterte administration targets economic growth of between 6-7 percent this 2019 coming from last year’s 6.2 percent. This has been scaled down from 7-8 percent previously, with Finance Secretary Carlos Dominguez III citing around ₱46 billion in missed spending opportunities during the first quarter.

The Cabinet official said the country already missed the best time to start construction projects, as an election ban on public works started late March while the rainy season will come in the next few months.

But Emilio Neri, Jr., chief economist of the Bank of the Philippine Islands, said investments and state spending could come as “surprises” to the GDP story, pointing out that election-related spending may have also boosted economic activity.

For his part, Security Bank economist Robert Dan Roces said he sees growth picking up in the next two quarters, as the government can finally proceed with its postponed projects with the budget already signed into law.