Philippines 2019 GDP growth hits 8-year low on weak farm output, budget delay

Gross domestic product grew 6.4 per cent in the last three months of the year from a year ago.
Gross domestic product grew 6.4 per cent in the last three months of the year from a year ago.PHOTO: AFP

MANILA (REUTERS) - The Philippine economy gathered momentum in the final quarter even though full-year growth slid to an eight-year low and missed the target, tempered by weakness in agriculture and the impact of budget approval delays.

Gross domestic product grew 6.4 per cent in the last three months of the year from a year ago, the statistics agency said on Thursday (Jan 23), missing the 6.5 per cent forecast in a Reuters poll.

However, it was faster than the previous quarter's revised growth of 6.0 per cent, thanks to strong domestic demand and government spending.

That brought full-year growth to 5.9 per cent, missing the low-end of the government's 6.0 per cent-6.5 per cent expansion target. It marked the lowest growth in eight years, according to Socioeconomic Planning Secretary Ernesto Pernia.

Noting weakness in exports, analysts at Capital Economics say the fourth quarter rebound in growth is unlikely to last, adding the 6.4 per cent expansion "will be as good as it gets.".

The economy, which grew 6.2 per cent in 2018, remains one of Asia's fastest growing economies.

The pick up in fourth quarter growth reflected strong domestic consumption, underpinned by benign inflation, as well as a faster turnaround in government outlays, which offset weak farm output and trade.

"A full percentage point was lost because of the delay in the passage of budget. We could have grown close to if not right smack 7 per cent," Mr Pernia said.

The below-target growth in 2019 may prompt the central bank to resume easing within the first quarter, either through a cut in the policy interest rate or banks' reserve requirement ratio, said Bank of the Philippine Islands economist Emilio Neri.

 
 
 
 

The Bangko Sentral ng Pilipinas holds its first policy meeting this year on Feb. 6.

With inflation having averaged 2.5 per cent last year, well inside the BSP's 2.0 per cent-4.0 per cent target range, the central bank has said it could afford to resume easing monetary policy this year after last year's three interest rate cuts totalling 75 basis points.

The government's efforts to catch up with its expenditure plans, which were delayed by the approval of last year's budget, have paid off with public spending up 22 per cent in November from a year ago.

"This key engine of growth is expected to provide further support for the economy in 2020, assuming no further delay in budget approval," said Mr Jiaxin Lu, economist at Continuum Economics.

President Rodrigo Duterte this month signed a record 4.1 trillion pesos (S$108.5 billion) budget for this year, up 12 per cent from last year, ensuring timely funding for an infrastructure overhaul in the country of more than 105 million people.

Political squabbling in Congress, however, delayed last year's budget approval by four months, weighing down the Southeast Asian nation's economic growth.

The government is targeting economic growth of 6.5 per cent-7.5 per cent this year.

The central bank is optimistic that 7 per cent growth is attainable this year.