THE ASEAN+3 Macroeconomic Research Office (AMRO) has slashed its Philippine growth forecast for this year following the “weak” economic expansion in the first quarter, which was dragged by the delay in the passage of the 2019 national budget.

In a press conference yesterday, AMRO Chief Economist Hoe Ee Khor said the group sees the country’s gross domestic product (GDP) growing by 6.3% this year, a tad lower than the 6.4% forecast published in AMRO’s ASEAN+3 Regional Economic Outlook (AREO) 2019 published in May.

“It was our best estimate at that time, but we didn’t expect the first quarter to be so weak,” Mr. Khor said yesterday.

He said the economy’s expansion slowed down “unexpectedly” in the first three months of the year “much more on budget impact.”

“We expect growth to bounce back up because (the budget impasse) is expected to be a one-off event,” Mr. Khor added.

The government operated on a reenacted 2018 budget from the start of the year until April 15, when President Rodrigo R. Duterte signed the latest general appropriations bill into law, but vetoed P95.3 billion in appropriations that he said were not in accordance with the administration’s priorities, slashing this year’s national budget to about P3.662 trillion.

The delay prompted the inter-agency Development Budget Coordination Committee in mid-March to cut its 2019 GDP growth assumption to 6.7% from 7-8% originally.

This was also largely blamed by economic managers for the slowdown in the country’s GDP growth in the first quarter to 5.6% — its worst performance in four years.

The first-quarter outcome was lower than the 6.3% print in the preceding quarter and 6.5% in the first quarter of 2018.

In its latest economic outlook, AMRO said Philippine economic growth will likely “recover on the back of buoyant domestic demand,” although “with the balance of risks to growth tilted to the downside.”

“Monetary conditions have tightened, but credit continues to expand,” the group noted in its latest report, adding that “[c]redit growth is anticipated to remain elevated, but as real borrowing cost starts to rise, it is likely to moderate.”

At the same time, Mr. Khor said AMRO also slashed its GDP growth forecast for the ASEAN+3 region to 4.9% from the 5.1% projected in its 2019 AREO.

“Now, we expect growth to be a shade lower. Our latest estimate now is 4.9% this year and for next year. In the worst case scenario, when there’s no (trade) agreement (between the US and China), we expect it to be shaded out by another 0.2 percentage point.”

US President Donald J. Trump said on Twitter Tuesday night that he will meet with his Chinese counterpart Xi Jinping next week during the G20 Summit in Japan, with their respective teams beginning talks prior to the meeting.

Beijing and Washington’s trade relations soured once again in May after both countries imposed tariffs on each other’s imports.

Despite this, AMRO said the region remains resilient, anchored by sustained domestic demand and recent declines in interest rates.

Mr. Khor said the impact of the US-China trade war on the Philippines is expected to be low and is estimated to shave just 0.06% off the country’s economic growth this year.

“As I have mentioned, Philippines is not part of the global value chain. It’s much more of a service economy,” he added.

AMRO — initially formed as a company in April 2011 and transformed into an international organization in February 2016 — conducts macroeconomic surveillance and supports implementation of the Chiang Mai Initiative Multilateralization currency swap arrangement which the 10 members of the Association of Southeast Asian Nations, as well as China, Japan and South Korea adopted to help avert any financial crunch. — Karl Angelo N. Vidal