Manila-based Asian Development Bank (ADB) on Thursday cut its economic growth forecast for the Philippines for 2019 because of the delay in the passage of the national budget.

In a supplement to its annual Asian Development Outlook, the regional bank said Philippine gross domestic product (GDP) was expected to grow by 6.2 percent this year instead of the earlier forecast of 6.4 percent in April.

The ADB, however, kept its 2020 GDP growth outlook at 6.4 percent.

“Growth moderated in the Philippines from 6.3% year on year in Q4 of 2018 to 5.6% in Q1 of this year as the delayed passage of the national budget held back government spending. Public construction contracted by 8.6% while growth in government consumption eased from 12.6% year on year in Q4 of 2018 to 7.4% in Q1 of 2019,” the report said.

“Growth in exports of goods and services also slowed as a result of lackluster global trade and economic activity and the downturn in the electronics cycle. These effects were partly offset by higher household consumption and private investment. As a consequence of these developments in Q1, the growth forecast is revised down to 6.2% for 2019, though maintained at 6.4% for 2020,” it added.

The ADB said developing Asia will maintain strong but moderating growth over 2019 and 2020 as vibrant domestic demand counteracts an environment of global trade tensions.

It maintained its growth forecasts for developing Asia at 5.7 percent in 2019 and 5.6 percent in 2020, unchanged from its April forecast. The growth rates were slightly down from 5.9 percent in 2018. 

Setting aside newly industrialized economies of Hong Kong, China, South Korea, Singapore and Taiwan, the regional growth outlook was revised down from 6.2 percent to 6.1 percent in 2019. That rate was maintained for 2020.

The ADB said the deepening trade tension between the China and the United States remained the largest downside risk to its outlook, despite an apparent truce or cooling off in late June that could allow trade negotiations between the two countries to resume.

“Even as the trade conflict continues, the region is set to maintain strong but moderating growth,” said ADB chief economist Yasuyuki Sawada. Until the world’s two largest economies reach agreement, “uncertainty will continue to weight on the regional outlook,” he said.

The growth outlook for East Asia in 2019 was revised down to 5.6 percent because of slower-than-expected activity in South Korea. The sub-region’s growth outlook of 5.5 percent for 2020 was unchanged from April, with forecasts of 6.3 percent in 2019 and 6.1 percent in 2020, as policy support offsets softening growth in domestic and external demand.

In South Asia, according to the ADB report, the economic outlook was robust, with growth projected at 6.6 percent in 2019 and 6.7 percent in 2020, despite a lower forecast in April. The growth outlook for India was cut to 7.0 percent in 2019 and 7.2 percent in 2020 because the fiscal 2018 outturn fell short.

For Southeast Asia, the outlook was downgraded slightly to 4.8 percent in 2019 and 4.9 for 2020 due to the trade impasse and a slowdown in the electronics cycle. For Central Asia, the growth outlook for 2019 was revised up to 4.3 percent due to the improved outlook for Kazakhstan.

Developing Asia’s inflation projections were revised from 2.5 percent to 2.6 percent for 2019 and 2020, respectively, as higher oil prices and various domestic factors, including the outbreak of African swine fever in several Asian economies, were expected to drive up prices. (Melo M. Acuña)