Economists eye impact of slower China GDP on PH

Regina Capital managing director Luis Limlingan said term growth slows from key trading partner may spill over to the Philippines. BLOOMBERG
Regina Capital managing director Luis Limlingan said term growth slows from key trading partner may spill over to the Philippines. BLOOMBERG

MANILA – Some economists have discounted a negative impact on the Philippines in the near term, of the slower second quarter growth of the Chinese economy this 2019.

Gross domestic product (GPD) of the world’s second largest economy posted a nearly 30-year low of 6.2 percent from 6.4 percent in the previous quarter, which economists said reflects the weaker global economic outlook.

Regina Capital managing director Luis Limlingan told said that the Chinese economy’s output from April to June this year is within market expectations “so it wasn’t that much a shock.”

He, however, pointed out that “still it raises concerns long term of a slowdown.”

“But long term, if growth slows, it may spill over to us as China is a key trading partner,” he added.

Also, Union Bank of the Philippines chief economist Ruben Carlo Asuncion said that he does not see any direct and significant impact on the Philippine economy of this latest growth report from China.

“The internal conditions, at this point, are stronger driver of Philippine GDP growth,” he said, citing the improvement in government spending.

“Government spending has been an important indicator so far this year (in) determining economic growth,” he added.

Data from the Bureau of the Treasury (BTr) show that as of end-May this year, government expending declined by 0.8 percent year-on-year to P1.314 trillion against P1.325 trillion a year ago.

Authorities attributed the slower government expenditures growth to the delay in the approval of this year’s national budget, which affected the government’s ability to spend according to the program for this year.

Congress approved the proposed P3.757-trillion national budget only last February while President Rodrigo R. Duterte signed it into law last April 15.

BTr data show that in 2018, total government spending reached P3.408 trillion, which is 21 percent higher than the previous year’s P2.823 trillion.

Total revenues last year rose 15 percent to P2.85 trillion from P2.473 trillion a year ago.

This resulted in a budget gap of P558.3 billion, 59 percent higher than the previous year’s P350.6 billion, with the jump attributed to the government’s infrastructure program.

Similarly, Michael L. Ricafort, Rizal Commercial Banking Corporation (RCBC) Economics & Industry Research Division head, said China’s slower output “could lead to slower growth in Philippine exports/trade, that could, in turn, lead to slower Philippine economic/GDP growth than otherwise.”

This development may result in another cut in the Bangko Sentral ng Pilipinas’ (BSP) key policy rates to help boost domestic growth after a slide in the first quarter to 5.6 percent from 6.3 percent quarter ago due to the impact of the budget approval delay, he said.

BSP’s policy-making Monetary Board (MB) will have its fifth rate-setting meet for the year on August 8.

It is widely expected to cut BSP’s key rates further after inflation last June reverted to its downward path and slowed to 2.7 percent after rising to 3.2 percent in the previous month. Inflation last April was three percent.

The MB cut the BSP’s key rates by 25 basis points last May on account of the sustained decline of inflation rate, which peaked at 6.7 percent in September and October 2018.

Ricafort added that easing global inflation, as a result of the global economic slowdown, and the possible cut in Federal Reserve’s key rates when the Federal Open Market Committee meets on July 30-31, 2019 may also be among the factors that may prompt the MB to further slash the BSP’s policy rates. (PNA)

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