Philippines wilts on growth goals in the heat of US-China trade war

Manila

PHILIPPINE President Rodrigo Duterte's government has given up on its goal to expand the economy by as much as 8 per cent in the medium term due to rising uncertainties, including the US-Sino trade tensions.

The government said on Wednesday that it cut its growth goals for 2021 and 2022 to 6.5 to 7.5 per cent from the previous forecast of 7 to 8 per cent, but kept the 2020 target at 6.5 to 7.5 per cent.

"We are going to be affected adversely by the trade war which will affect global growth," Economic Planning Secretary Ernesto Pernia told Reuters. "It is not only the Philippines that is down scaling the targets." The government also trimmed this year's growth target to 6 to 6.5 per cent from 6 to 7 per cent, to reflect weak economic activity in the first half due to the delay in the budget approval, which slowed government spending.

A joint congressional committee on Wednesday approved the government's 4.1 trillion pesos (S$109.6 billion) budget for 2020, to avoid a repeat of this year's delays and pave the way for higher infrastructure spending to boost growth.

GDP in July-September grew 6.2 per cent from last year, exceeding the prior quarter's 5.5 per cent growth, increasing the country's chances of meeting at least the bottom-end of this year's revised growth goal.

An inter-agency committee in charge of setting the government's medium-term macroeconomic and fiscal targets said it also revised foreign exchange assumptions. The forex assumption is now 51-52 to the dollar for 2019, and 51-54 from 2020 to 2022, it said in a statement.

Export growth projections for this year and 2020 were cut to 1 per cent and 4 per cent, respectively, from the previous 2 per cent and 6 per cent due to the prolonged trade dispute. The government kept the export growth projection for 2021 and 2022 at 6 per cent.

At the start of Mr Duterte's term in June 2016, his government set a medium-term growth target of as much as 8 per cent as it laid out an ambitious US$180 billion infrastructure overhaul called "Build, Build, Build".

Even that plan was modified after the authorities admitted that several big-ticket infrastructure projects such as long bridges under that programme were not feasible. REUTERS