2019 GDP growth now expected at 5.9%

2019 GDP growth now expected at 5.9%


UnionBank Publication

UnionBank Publication

9 Oct 2019, 10:00 — 5 min read

This year’s Gross Domestic Product (GDP) growth is expected at 5.9% first half of slow investment grow because of the stalled spending economic growth in the first half of 2019 averaged at 5.5%, much slower than the 6.3% growth average of the same period last year.

The low domestic economic growth is seen to have been the reason of economic growth moderation, which was a main consequence of the contraction in government spending on infrastructure and contractionary monetary policy.


Private consumption has sustained its growth year-on-year at 5.8% due to higher employment, declining inflation and robust growth in remittances from overseas Filipino workers, and has made the largest demand-side contribution to economic growth

Meanwhile, government consumption has slowed from 12.6% in the first half of 2018 to 7.1% in the same period this year, directly linked to the delayed passing of the 2019 national government budget.

Domestic investment (capital formation), after robustly growing in the previous four years, grew by 14.9% in the first half of 2018. Private construction acceleration though short to offset the decline in public construction, resulted to overall investment falling 0.1% in the first half of 2019. The weaker external demand, a confluence of the protracted US-China trade conflict and the growing expectations of a weaker global economic growth outlook, lead to slow growth of exports of goods and services to 5.0% in the first half of the year from 12.6% in the same period of 2018. Growth of imports of goods and services declined from 16.1% to 4.2%, showing the tepid demand for export-related inputs and demand for capital imports due to the soft domestic investment.

Figure 1

On the supply-side of GDP growth, service output growth increased from 6.7% in the first half of 2018 to 7.0% in the same period this year, contributing to almost three-fourths of GDP expansion. Industry growth has decelerated from 7.1% to 4.2% attributable to the slowdown in both manufacturing and construction, year-on-year.

figure 2


Agriculture output growth again plateaued to 0.7% year-on-year. This growth stagnation was mainly caused by the El Nino phenomenon early this year, and further worsened by structural inefficiencies and other productivity challenges.

figure 3

After the budget legislation delay in the first half of 2019, the anticipated second half of the year economic growth recovery clearly hinges on how fast the government budget catch up on infrastructure spending.

Meanwhile, the waning global economic demand and the uncertainties of trade issues between the US and China may weigh in on GDP growth forecasts. UnionBank’s Economic Research Unit (ERU) uses nowcasting or its NowcastingPH2 forecasting model. If GDP growth numbers were to be released today, ERU sees the third quarter GDP at 6.1%, fourth quarter GDP at 6.5%, and full-year 2019 GDP growth average at 5.9%.

Also read: July inflation cools to 2.4%

For 2020, GDP is expected to expand to 6.6%. These economic growth forecasts are largely based on the potential recovery of domestic investment, particularly that of the public side. These expectations are premised on the continuous government expansionary fiscal policy reforms and accommodative monetary policies.

Article by Ruben Carlo Asuncion

Disclaimer: While this document is based on information obtained from sources we believe to be reliable, we do not make any representations as to its accuracy, completeness, correctness, timeliness or use for any particular purpose. Opinions and statements expressed here are those of their author(s) as of the date of this report and not of Union Bank of the Philippines (UBP). The opinions and statements provided in this document are subject to change without prior notice. Any recommendation contained in this document does not have regard to the reader’s particular investment objectives, financial situation and any other specific needs. This document is for informational purposes only and UBP is not soliciting any action based on it. Nothing here shall to any extent substitute for the independent investigations and the technical and business judgment of the reader. Your use of this document and any of its contents is at your own risk and UBP does not accept any liability for the results of any action or decision taken on the basis of or reliance on this document or any of its contents.  

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