DOF optimistic on hitting lower end of growth target

MANILA, Philippines — The Department of Finance (DOF) is still optimistic that economic growth can reach at least six percent this year on the back of the expected recovery in public spending as well as lower inflation for the rest of the year.

In a statement, Finance Secretary Carlos Dominguez said he remains hopeful that gross domestic product (GDP) growth “in the coming quarters” would hit the lower end of the government’s six to seven percent target, following a slower-than-expected performance in the second quarter.

For one, he said the government is implementing a spending catch-up strategy to accelerate disbursements and speed up the implementation of projects in the second half.

He said this is expected to reverse the public underspending seen in the first half, which resulted from the delay in the passage of the 2019 budget. 

“In infrastructure – with its multiplier effects on growth – the bulk of the disbursements in the second semester is expected to keep economic expansion on a higher plane, barring obstacles such as erratic weather disturbances,” Dominguez said.

He said stronger domestic consumption amid the continued slowdown in inflation may also provide stimulus to the economy, and enable the government to meet its goals.

Despite his optimism, Dominguez said the government’s economic team would look out for possible downside risks that could weigh down growth in the second semester, such as the escalating trade war between and US and China, as well as weak farm production.

Economic growth slowed down to 5.5 percent in the second quarter from 5.6 percent in the previous quarter and 6.2 percent in the second quarter of 2018. This was the lowest in over four years, or since the 5.1 percent expansion posted in the second quarter of 2015.

Dominguez said this was “not unexpected” given the residual effects of the delay in the passage of the 2019 national budget by Congress.

“Second quarter growth was not an unexpected result given the apparent lingering impact on the government’s accelerated spending program of the four months-and-a-half delay in the passage of the 2019 budget in the House of Representatives. This delay was further exacerbated by the ban on infrastructure projects during the election campaign,” Dominguez said.

Dominguez said this points to “the pernicious impact on the domestic economy of the undue delay in the approval by the House of the national budget, more so in the midst of an unprecedented aggressive public spending program to stimulate high—and inclusive—growth.”