THE INTERNATIONAL MONETARY FUND (IMF) has slashed further its gross domestic product (GDP) growth projection for the Philippines, adding to other groups that now expect the economy to miss the government’s targets for this year and 2020.

According to the October issue of the IMF’s World Economic Outlook, titled “Global Manufacturing Downturn, Rising Trade Barriers,” the Philippines’ gross domestic product (GDP) is now projected to grow by 5.7% this year from the six percent it gave in July, the 6.5% forecast it penciled last April, as well as 6.6% and 6.7% given in October and September last year.

GDP clocked in at 6.2% last year, and is targeted by the government to pick up to 6-7% this year and then to 6.5-7.5% in 2020 and 7-8% in 2021-2022.

For 2020, the IMF expects Philippine GDP growth at 6.2% from the 6.3% it gave in July and from its earlier projection of 6.6%.

It also gave a 6.5% projection for 2024.

The Philippines’ projection is a tad lower than the 5.9% given for Emerging and Developing Asia for this year, but better than the region’s six percent for 2020 and 2024.

But it is better than the 4.8% and 4.9% 2019 and 2020 projections for the five biggest developing Southeast Asian countries. In this group, only Vietnam will outpace the Philippines with a 6.5% forecast for both years. Indonesia (five percent and 5.1%), Thailand (2.9% and three percent) and Malaysia (4.5% and 4.4%) have lower projections.

The report, which cited the Philippines and China as Asia’s “significant reformers”, said “[g]rowth in 2019 has been revised down across all large emerging market and developing economies, linked in part to trade and domestic policy uncertainties.”

“Downside risks to the outlook are elevated. Trade barriers and heightened geopolitical tensions, including Brexit-related risks, could further disrupt supply chains and hamper confidence, investment and growth,” it added.

“Such tensions, as well as other domestic policy uncertainties, could negatively affect the projected growth pickup in emerging market economies and the euro area.”

Other multilateral lenders have scaled down their GDP projections for the Philippines, with Asian Development Bank slashing it to six percent and 6.2% for 2019 and 2020 (from 6.2% and 6.4% previously); and the World Bank giving a 5.8% projection this year, 6.1% for 2020 and 6.2% 2021 (from 6.4% for 2019 and 6.5% for both 2020 and 2021).

Other outfits have slashed their forecasts as well, with ASEAN+3 Macroeconomic Research Office downgrading its 2019 and 2020 forecasts to six percent and 6.4%, respectively (from 6.3% and 6.5% previously); S&P Global Ratings trimming it down to six percent and 6.2% for 2019 and 2020, respectively (from 6.1% and 6.4%). MOODY’s Investors Service also slashed its projection to 5.8% for 2019 from six percent previously.

“One of the biggest factors is low investment due to slower government spending, a result of the delayed national budget. The weak external environment because of the trade conflict may also have been cited but export performance has been positive. However, the softer import performance this year has been a confirmation of lower government expenditure,” UnionBank of the Philippines Inc. Chief Economist Ruben Carlo O. Asuncion said in an e-mail.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort pointed out in an e-mail that “[t]he declining trend in both local inflation and local interest rates have kept some consumers, businesses/investors, government and other institutions on the sidelines earlier this year, while waiting for interest rates to go down further, before they become more aggressive in their borrowings/financing… as manifested by relatively slower growth in loans and domestic liquidity/M3.”

For his part, Bank of the Philippine Islands Lead Economist Emilio S. Neri cited growing risks to global economic activities. “Global headwinds have been more forceful than many economists had expected with surprises from Hong Kong, Great Britain and of course the unexpected magnitude of escalation of protectionist policies worldwide,” he said in an email to BusinessWorld. “With threats of weaker performance in agriculture and food manufacturing resulting from the collapse of rice farmgate prices and the weaker performance of the livestock sector due to the African swine fever, a catch-up in government spending and improvement in private sector confidence even becomes more crucial. The safety nets for the rice farmers need to be rolled out more quickly to cushion the impact of falling incomes.”

In the face of delayed government spending due to the three-and-a-half month delay in 2019 national government enactment last Apr. 15, ING NV-Manila Nicholas Antonio T. Mapa is of the view that household consumption may have to do the heavy lifting to cushion slow investment activity. “Thus, the economy will have to bank on household consumption to do the heavy lifting and offset still-likely subdued investment activity while government spending looks to rebound after the budget was finally passed… Fortunately, inflation has decelerated quickly to give consumption a power boost while latest government spending data have returned to growth. — Luz Wendy T. Noble