Philippines cuts 2019 GDP growth target, cites budget squabble

A farmer arranges bananas atop a cargo vehicle to be transported to vendors in Manila, in Magsaysay, Occidental Mindoro in central Philippines Feb 23, 2013. (Reuters file photo)

MANILA, Mar 14, 2019, Reuters. The Philippines on Wednesday cut its 2019 GDP growth target to 6-7%, from 7-8%, citing a delay in final legislative approval of the budget, and the economic planning chief said growth might fall to below 5%, reported the Bangkok Post.

The government’s economic team also raised its inflation target for this year, to 3-4% instead of 2-4%, and trimmed the 2020 growth target to 6.5-7.5% from 7-8%.

The team kept unchanged its assumption that the peso will have an exchange rate of 52-55 against the dollar from now through 2022.

Finance Secretary Carlos Dominguez told reporters the reduced GDP growth targets reflected the absence of a 2019 government budget and the trade dispute between the United States and China, key Philippine trading partners.

Squabbling between the Senate and the House of Representatives over allegations of fund realignments in the already ratified 2019 budget has delayed signing of the budget bill by President Rodrigo Duterte.

As a result, the government is operating on last year’s budget.

“We are really concerned that this delay is dragging on too long,” Dominguez said. “For the first quarter of the year, the fact that we did not have the budget we presented meant that we had 46 billion pesos 27.5 billion baht) less to spend.”

Earlier on Wednesday, Socioeconomic Planning Secretary Ernesto Pernia said the economy may grow by as little as 4.2-4.9% this year if the delay in full approval of the budget continues.

He said the growth target this year also takes into account the impact of a “mild” El Nino phenomenon on agricultural output.

Last year, the Philippine economy expanded 6.2%.

Pernia said the budget impasse is hurting the government’s ability to execute programs and pursue infrastructure and other projects.

“Thus we call for the immediate passage of the 2019 budget. The longer we wait, the more adverse the effect will be,” he said.

Leaders of the two Congress chambers met with Duterte on Tuesday night about the budget issue but failed to settle their dispute.

Duterte would not intervene in the squabble but he had urged the lawmakers to break the stalemate, his spokesman Salvador Panelo said.

“There is a budget impasse due to some constitutional questions raised by both chambers. Only Congress can resolve and break this impasse,” Panelo said in a statement, without elaborating.

The government’s change in the 2019 inflation forecast may impact views on monetary policy this year.

A significant decline in the inflation rate, which was well above the central bank’s 2-4% target for parts of 2018, and other factors have led to some hopes interest rates will be reduced.

The new central bank governor, Benjamin Diokno, citing cooling inflation, said on Tuesday there is room to ease monetary policy and raised the possibility of several cuts this year in the amount of cash that banks must hold as reserves.

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