World Bank downgrades Philippines forecasts

MANILA, Philippines — The World Bank has downgraded its growth forecasts for the Philippines this year and next on assumptions of a reenactment of the national budget in the first quarter and weakness in global demand that may continue to hurt exports.

The international finance institution adjusted its economic growth projections for the country to 6.4 percent this year and 6.5 percent in 2019. This compares with its October expectations of 6.5 percent for 2018 and 6.7 percent for 2019.

The delay in the passage of the 2019 national budget is expected to result in the reenactment of the previous year’s budget by at least the first quarter of next year, denying funding for some lined up projects.

“Investment growth may be tempered in the first half of 2019 due to the possible reenactment of the first quarter 2019 budget following a delay in the budget approval process. Moreover, global trade is expected to remain weak, thus dampening exports,” WB said.

A squabble between lawmakers and the Department of Budget (DBM) over insertions in the proposed P3.757-trillion national outlay is hampering the passage of the appropriations measure.

Budget Secretary Benjamin Diokno said fund releases for projects aimed at promoting economic activity would be reduced by P44 billion if no new budget is passed in the first quarter.

Nonetheless, the WB said the Philippines is still expected to be among the fast-growing economies in East Asia and the Pacific region.

It noted that while high inflation may have tempered the growth in household consumption in the fourth quarter of 2018, a moderation in inflation in the following quarters is expected to boost consumer confidence and raise private consumption in 2019.

The mid-term election in May is also expected to strengthen consumption by temporarily raising employment and disposable incomes in early 2019.

“A strong, consistent delivery of the infrastructure investment agenda while sustaining improvements in health, education and social protection will be key to maintaining the robust and inclusive growth outlook of the Philippines,” said Rong Qian, World Bank senior economist.