THE Philippine economy is projected to have slowed to a below 6-percent expansion in the first quarter of the year on slower capital formation and lower government consumption.

ING Bank Manila economist Nicholas Mapa said he forecasts the first-quarter gross domestic product (GDP) growth of the country to fall below 6 percent, down from the 6.3 percent seen in the previous quarter.

Among the challenges to growth in the first-quarter, Mapa said, were capital formation and the dent in government consumption.

“Capital formation is slowing, in particular fixed capital formation with a noticeable loss of momentum for construction and durable equipment growth.

This is reflected in the import numbers, which showed both raw materials and capital goods slowing down,” Mapa said.

“Government final consumption will also be a casualty to the budget delay with government workers seeing a delay in their salary adjustment.  The reenacted budget likely slowed the pace of government spending in the first quarter,” he added.

Aside from this, the economist also said that although import growth has slowed, exports remain lackluster, leading to a still substantial trade gap, which is seen to sap overall GDP momentum.

The decline in growth could have been larger for the month, if not for the steady household consumption during the period.

“Household final consumption, which is roughly 65 percent of the economy, will be back with inflation sliding nicely back within target.  Last year, we saw how consumption had taken a back seat, especially in the second half after inflation peaked,” Mapa said.

“We’re going to be counting on household spending to do the heavy lifting in 2019 now that most other sectors will be challenged,” he added.

For the second quarter, Mapa said growth is expected to recover, but only marginally, due to the lingering budget delay.

“Growth may recover a bit by the second quarter, although the budget delay and its possible implementation only toward the end of May could mean that if ever we crest 6 percent, growth will only be slightly higher than 6 percent,” Mapa said.

“The second half however will see a recovery with base effects, even faster consumption and possible boost from BSP rate hikes seen to bolster growth closer to 6.5 percent by year-end,” he added.

Forecasts cut

Several international experts have already cut their growth forecasts of the Philippines for this year, primarily due to the government’s inability to pass a budget on time.

Most recent of these is the International Monetary Fund (IMF), which said the Philippines is now expected to post a 6.5-percent growth. This is slightly slower than the 6.6-percent forecast by the global monetary authority in October 2018.

The Asian Development Bank (ADB) also cut its growth forecast of the country to 6.4 percent from the 6.7-percent forecast in September 2018.

In mid-March, the Development Budget Coordination Committee (DBCC) lowered its own gross domestic product (GDP) projection of the country to a range of 6 to 7 percent from the earlier 7 to 8 percent range.