Tighter spending to drag down GDP

The Philippines’ plan to temper spending on public goods and services in a bid to narrow its budget deficit to pre-pandemic levels may slow economic growth, according to the think tank Capital Economics.

- BEN ARNOLD DE VERA

“Monetary easing across the region should support consumption and investment, but tighter fiscal policy will partly offset this boost, especially in the Philippines and Malaysia,” Capital Economics senior Asia economist Gareth Leather, markets economist Shivaan Tandon, and assistant economist Joe Maher said in a June 26 report.

Capital Economics had projected Philippine gross domestic product (GDP) growth to slide to 5.3 percent this year from 5.7 percent last year. If the think tank’s forecast materializes, it would be the slowest economic expansion since reopening from the most stringent Covid-19 lockdowns, while also falling short of the government’s downgraded target range of 5.5 to 6.5 percent.

Despite the less optimistic and below-goal projection, Capital Economics said it expects this year’s GDP growth to “remain healthy.”

In fact, another Capital Economics report on emerging markets (EMs), also published on June 26, showed that the Philippines is poised to be the fastest-growing EM even among those with a slowing growth outlook.