MANILA, Philippines — Economists are looking at a slower economic expansion for the Philippines this year due to the disappointing gross domestic product (GDP) growth in the second quarter.
Fitch Solutions revised downwards its GDP growth forecast for the Philippines to 6.3 percent instead of 6.5 percent this year due to the slower-than-expected GDP figures in the second quarter, tighter monetary conditions, and worsening trade war between the US and China.
“We are revising our 2018 real GDP growth forecast for the Philippines down to 6.3 percent, from 6.5 percent previously, to take into account the sub-par economic performance in the first half, and also our expectations for growth headwinds from tightening monetary conditions and deepening trade tensions globally to persist in the coming quarters,” said the research arm of the Fitch Group.
Economic managers at the Cabinet-level Development Budget Coordination Committee (DBCC) had penciled a GDP expansion of between seven and eight percent this year from last year’s 6.7 percent.
“Although the magnitude of the slowdown came as a surprise to us, the downward trajectory was in line with our expectations,” Fitch Solutions said.
It pointed out the Philippines would continue to face headwinds from both external and domestic shocks for the rest of the year.
“Over the coming quarters, we expect the economy to face mounting growth headwinds stemming from tighter monetary conditions both domestically and globally, deepening trade tensions between the US and its trade partners, as well as a sub-par business environment which will keep a lid on private investment,” it said.
The Duterte administration continues to push forward with its infrastructure development initiative, and this has resulted in a sharp increase in the stock of durable equipment and acceleration in construction activity.
While the investment drive is positive for the economy, which suffers from under-developed infrastructure, we question the sustainability of the government’s aggressive move, in the absence of improvements to the business environment and larger involvement of the private sector.