MANILA, Philippines — Singapore-based think tank ASEAN+3 Macroeconomic Research Office (AMRO) has trimmed its economic growth forecast for the Philippines and the rest of the region due to the impact of the trade war between the US and China.
Hoe Ee Khor, chief economist at AMRO, said in a press conference they are now looking at a slightly lower gross domestic product (GDP) growth of 6.3 percent instead of 6.4 percent for the Philippines in 2019 and 2020.
Despite the cut, Khor said the Philippines would remain the fastest growing economy in the region.
“We didn’t expect first quarter to be so weak. So despite the very weak first quarter we expect the economy to bounce back. On a quarterly basis, we expect the economy to be stronger in the second, third and fourth quarters,” Khor added.
Khor said the setback in the first quarter was temporary as this was caused by a one-off event due to the delayed passage of the 2019 national budget.
“Nevertheless we felt that because of the external environment and because of the bounce-back from the very weak first quarter, overall growth would be about 6.3 percent, which is still a very robust growth rate. We expect this to be a temporary slowdown and the economy will rebound very quickly,” Khor said.
Under a worst case scenario, Khor said the impact of the US-China trade war on the country’s GDP growth would be minimal at -0.06 percent
“Growth slowed down unexpectedly in the first quarter. That’s not related to the trade war, much more on budget impact. We expect growth to bounce back up because it is expected to be one-off event,” Khor added.
For the entire ASEAN+3, Khor said the think tank lowered the GDP growth target to 4.9 percent instead of 5.1 percent for 2019 and 2020. This is also lower than the GDP growth of 5.3 percent in the region last year.
“Regional growth in 2019-20 is expected to moderate slightly, below five percent, taking into account the re-escalation of global trade tensions and earlier policy support,” Khor said.
If no agreement is reached between Washington and Beijing, the economist said the region’s GDP growth would slow down to 4.7 percent for 2019 and 2020.
Aside from the escalating global trade tension with the imposition of additional tariffs by the US, other risks include the sharp slowdown in China’s growth as well as escalation of geopolitical risks.
Other medium impact risks, Khor said, include large swings in asset prices from global monetary policy shifts as well as sharp deceleration in global growth and weaker oil prices.
BSP Deputy Governor Diwa Guinigundo said the Philippines has undertaken several reforms since the global financial crisis in 2008 and 2009 to help survive external shocks.