EASING monetary policy and a catch-up spending plan would help the government achieve its economic growth target of 6 to 7 percent this year, a Rizal Commercial Banking Corp. (RCBC) economist said on Tuesday.
The catch-up in government spending, especially on infrastructure, would likely be effective in achieving that target, RCBC head for economics and industry research division Michael Ricafort said.
The country’s gross domestic product hit a four-year low of 5.6 percent in the first quarter of the year due to the delayed approval of this year’s budget.
Economic managers earlier said they would implement an expenditure catch-up plan to offset the impact of that delayed budget on growth. They added that economic growth should expand by at least 6.1 percent over the next three quarters to hit the full-year target.
“Any further increase in government spending, also on social services that have the greatest impact on alleviating poverty, especially on education and healthcare, may also lead to faster economic growth and development that is more inclusive over the long run,” Ricafort said.
“Further improvements in the country’s fiscal management in terms of further increasing the recurring sources of government revenues and plugging leakages in government expenditures may increase the available government funds that may be used to further increase government spending on major infrastructure projects and on social services that further spur greater economic growth and development,” he added.
Besides the catch-up plan, Ricafort said the easing of monetary policy would also help boost growth.
“The latest easing of monetary policy especially by way of a 0.25-cut in local policy rates on May 9, 2019 and possible further cuts for the coming months of 2019 amid easing trend in inflation would reduce borrowing/financing costs and encourage greater demand for loans by consumers and businesses, thereby increasing economic activities and overall GDP growth,” he explained.
Ricafort said cuts in the reserve requirement ration (RRR) of banks would also spur growth.
“The cuts in RRR of banks over the next 3 months are estimated to release about P210 billion in additional peso funds into the financial system that banks may lend to various businesses and to consumers/households as well,” he said.
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