MANILA: The World Bank on Monday cut its economic growth forecasts for the Philippines for this year and next due to a delay in the 2019 budget approval and a slowdown in global trade that could hurt the country's exports.
The global lender projected the Philippine economy, among the fastest growing in Asia, to grow 6.4 percent in 2019 and 6.5 percent in 2020, down slightly from its previous forecasts of 6.5 percent and 6.6 percent, respectively.
For 2021, the Philippine economy is forecast to grow 6.5 percent.
"Higher private consumption due to lower inflation, steady growth of remittances, and election spending will fuel growth this year", Mara Warwick, World Bank Country Director for Brunei, Malaysia, Philippines and Thailand, said in statement.
The new forecast for 2019 is within the Philippine government's downwardly revised growth target of 6-7 percent for this year.
"Growth in public investment will be tempered in the first half of 2019 but is expected to recover in the second half of the year", Warwick said.
Squabbling between the Senate and the House of Representatives over allegations some members of the lower house reallocated funds to finance pet projects delayed the approval of the 2019 budget bill.
As a result, the government is operating on last year's budget. The bill is now awaiting President Rodrigo Duterte's signature.
The reduced expectations for growth also partly reflected risks posed by trade tensions between the United States and China, the strengthening U.S. dollar, and a risk that higher U.S. interest rates could raise borrowing costs for the infrastructure projects in the Philippines, the World Bank said.
Last year, the Philippine economy expanded 6.2 percent, the slowest in three years.
The World Bank said it expected domestic consumption, a key driver of Philippine economic growth, to rebound to 5.9 percent this year and 6.0 percent next year, from 5.6 percent in 2018, due to cooling inflation.
Spending related to the May 2019 mid-term elections should also support private consumption.
Inflation, which rose to a near decade high of 6.7 percent in September and October, is projected to return to the central bank's 2-4 percent target this year on easing food and fuel prices.
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