By Ian Nicolas Cigaral, April 4 2019; Philippine Star

Image Credit to Philippine Star

MANILA, Philippines — The upward revision on the Philippines’ gross domestic product figures for the final three months of 2018 showed that state spending drove growth last year amid sagging consumption and investment, a global bank said Thursday, adding that the adjusted GDP “masks slowing growth momentum”

GDP growth in the fourth quarter of 2018 was at 6.3%, higher than 6.1% that the Philippine Statistics Authority initially reported.

Despite the revisions, the PSA said economic growth for the entire 2018 was still at 6.2%, below the state’s 6.5-6.9% goal for the year and the weakest in three years.

“Growth was supported by government spending which offset weaker consumption and fixed capital investment, with the revision masking slowing growth momentum,” Nicholas Mapa, senior economist at ING Bank in Manila, said in a commentary.

In a bid to fight capital outflow and keep inflation in check, the Bangko Sentral ng Pilipinas lifted its policy rate by a cumulative 175 basis points last year. High inflation and surging borrowing costs have sapped consumer spending, which has traditionally been the driving force behind growth in the Philippines.

Socioeconomic Planning Secretary Ernesto Pernia early this year said the government expects household consumption to recover as inflationary pressures subside, adding that policymakers remain vigilant of inflation risks.

But Pernia flagged global headwinds that may dampen the domestic economy, including the US-China trade war and rising interest rates.

In the same commentary, ING Bank’s Mapa said a strong pickup in household consumption will be needed this year to counter the “slowing momentum” seen in other sectors of the economy, as government spending takes a back seat amid delays in the enactment of the 2019 budget bill.

He added that capital investment may also struggle due to tightening liquidity conditions and as the BSP’s rate hikes work their way through the economy.

“In coming months, the economy will look to tried and tested Filipino purchasing power to deliver the goods in 2019 and keep GDP above the 6% threshold,” Mapa said.

Last month, state economic managers slashed their 2019 GDP growth forecast to 6%-7% from 7%-8% originally as the government operates on a reenacted budget and catch up with spending. — Ian Nicolas Cigaral