MANILA – Fitch Solutions Macro Research on Wednesday downgraded its economic growth outlook on the Philippines, as it expects net exports of the country to fall during the year.
In a commentary sent to reporters, Fitch Solutions said it now expects economic growth at 5.9 percent this year, slower than its earlier forecast of 6.1 percent.
Should this be realized, the 5.9 percent growth would be the slowest annual growth recorded by the Philippines in eight years since the 3.7 percent registered in 2011.
This would also be the third consecutive year of deceleration of the gross domestic product (GDP) from the 6.9 percent in 2016, to the 6.7 percent in 2017, and the 6.2 percent in 2018.
“While we revised up our forecasts for domestic consumption, we revised down the net export component, from -0.7pp to -1.7pp and this was a key factor as why we expect growth to fall below 6.0 percent in 2019,” the commentary read.
According to the latest data available from the Philippine Statistics Authority (PSA), the Philippines posted a trade deficit of $3.14 billion in March, wider than the $2.34-billion deficit the same month last year.
Exports for the month slid by 2.5 percent to $5.88 billion versus the $6.02 billion recorded in 2018, following the drop in major commodities such as machinery and transport equipment.
“Net exports, weaker investment and government spending weighed on the headline growth figure, as trade tensions and delays passing the 2019 budget weakened momentum,” said Fitch Solutions.
Economic growth was recorded at 5.6 percent in the first quarter, the slowest in four years, which the government attributed to the delayed passage of the 2019 budget.
“The budget issue was resolved in April and fiscal stimulus should pick in late 2019 and heading into 2020. However, the weak external backdrop will prove a drag on headline growth, owing to ongoing US-China trade tensions and slowing global growth,” said Fitch Solutions.
“A further escalation of tensions or prolonged period of the tariffs introduced in May could likely lead us revise down our growth forecast of 6.3 percent in 2020,” it added.
Fitch Solutions noted, however, that economic growth is expected to pick up from the performance in the first quarter which fell below market expectations.
“We believe that economic growth will pick-up modestly from Q119 and into 2020, supported by government consumption and still-strong household demand,” said Fitch Solutions.
“Household consumption proved the key driver of growth in Q418 and Q119, averaging 5.8 percent y-o-y growth, and we expect this trend to continue over the coming quarters, growing 6.0 percent and 5.0 percent in 2019 and 2020 respectively,” it added. (GMA News)