Philippines growth still faces headwinds

• Aug 13, 2019

MANILA, Philippines — The Philippines’ economic growth would likely remain under pressure from both external and domestic factors after a disappointing performance in the first half, according to DBS Bank of Singapore.

DBS economist Maysita Crystallin said the delayed passage of the 2019 national budget has affected government infrastructure spending on the domestic side, while the US-China trade war remains at risk from the external side.

“Growth is expected to pick up, but still facing significant external headwinds,” she said.

The country’s gross domestic product (GDP) slowed down to a four-year low of 5.5 percent in the second quarter of the year from 5.6 percent in the first quarter due to the failure of Congress to pass this year’s budget on time.

Crystallin said the country’s trade balance remained weak with a year-to-date deficit reaching $16.5 billion as of end-May, wider than the $15.7 billion recorded in the same period last year.

“We see more risk for trade balance to weaken further in the second half as trade tension is unlikely to subside,” she said.

According to Crystallin, the recent depreciation of the Chinese yuan could trigger further increase in tariff on Chinese goods by the US.

The economist said the biggest impact to trade would be caused by weaker exports to the US, China and most importantly intra-Asian countries.

“Yet, slowdown in imports could provide some relief to trade deficit, especially as domestic demand remains limited,” she said.

Crystallin said the current easing cycle might need another three to four quarters before liquidity conditions ease in a substantive manner.

“In the meantime, fiscal support is needed to provide cushion for growth this year,” she said.

Economic managers penned a GDP growth of six percent to seven percent this year from last year’s 6.2 percent.

Source: https://www.philstar.com/business/2019/08/13/1942802/philippines-growth-still-faces-headwinds#EyqTVMBds7LkKjUp.99