Phl growth forecast trimmed to 5.8 pct

By Kathleen A. Martin, The Philippine Star

Posted at Jul 19 2014 09:53 AM | Updated as of Jul 19 2014 05:53 PM

MANILA, Philippines - New York-based think tank Global Source has slashed its growth forecast for the Philippine economy this year, citing the controversy over the Disbursement Allocation Program which may further cut government spending and investments.

In a report written by Filipino economists Romeo L. Bernardo and Marie Christine Tang, Global Source reduced its growth forecast for this year to only 5.8 percent.

This is lower than the think tank’s previous projection of a 6.1-percent growth, and remains below the government’s 6.5- percent to 7.5-percent target for the year.

Bernardo and Tang explained that the Supreme Court’s action declaring the P144-billion stimulus package illegal will significantly reduce government spending, which has been a driver of economic growth.

President Aquino earlier this week said Malacañang will appeal the Supreme Court’s decision on DAP.

“(M)ore timid government spending as projects and transactions come under increased scrutiny especially by state auditors and the executive’s lost flexibility in funding within-year spending priorities from identified savings, tell us that government outlays will again fall below program this year,” Bernardo and Tang said.

“Although we had expected underspending at the start of the year, we were looking at a J-curve recovery by the second half as government officials ironed out kinks and cleared away bottlenecks, most particularly in reconstruction and rehabilitation activities. We are less confident of that happening now,” they said.

The analysts pointed out that even if the share of infrastructure outlays in public expenditures has been low despite its steady increase through the past quarters, such has been “vital” in giving a boost to the domestic economy.

Philippine economic growth settled at a weaker-than-expected 5.7 percent in the first quarter, but government officials stood by their goal as prospects for the economy remained promising.