Philippines growth forecasts slashed

Amid COVID-19, Taal Volcano eruption

MANILA, Philippines — Economists have lowered their economic growth assumptions for the Philippines this year amid the impact of the coronavirus disease-2019 (COVID-19) and the eruption of Taal Volcano.

Ruben Carlo Asuncion, chief economist at Union Bank of the Philippines, said they are lowering their gross domestic product (GDP) growth forecast to 6.3 percent instead of 6.6 percent this year.

“As the COVID-19 spread enters a new phase where infections are multiplying outside China, UnionBank’s economic research unit lowers its initial full-year 2020 GDP growth forecast of 6.6 percent to 6.3 percent,” he said.

He pointed out GDP growth in the first quarter likely fell below six percent, or at a range of 5.4 to 5.9 percent.

“The Taal Volcano eruption barely made a dent on GDP growth in Q1 2020,” he added.

Asuncion said the growth forecast would most likely change as soon as new economic data are included, particularly the impact of the COVID-19 spread in China.

The Philippines has recorded 84 consecutive quarters of positive GDP growth, with 6.4 percent in the fourth quarter last year from six percent in the third quarter.

However, GDP growth slowed to an eight-year low of 5.9 percent in 2019 from 6.2 percent in 2018 amid soft global markets due to the US-China trade war, the tightening cycle by the Bangko Sentral ng Pilipinas (BSP) that saw interest rates jump by 175 basis points, as well as the delayed implementation of the 2019 national budget.

This was slower than the six to 6.5 percent growth target set by the inter-agency Development Budget Coordination Committee (DBCC).

Government’s economic managers earlier penned a GDP growth target of 6.5 to 7.5 percent this year.

ING Bank Manila economist Nicholas Mapa also said the government would be hard pressed to meet its 6.5 to 7.5 percent growth target due to the virus outbreak.

“Thus despite expectations for faster growth, unless we see additional stimulus from the government or a rapid clearing up of the situation, we may have to be content with growth faster than last year’s disappointing 5.9 percent print, but once again pressed to meet our target for a 6.5 to 7.5 percent expansion,” Mapa said.