DOF cites improving economic forecasts of private analysts


Six analysts have accurately predicted the inflation rate for October 2019 while another one gave a correct forecast of the gross domestic product (GDP) growth for the year's third quarter, according to the latest assessment by the Department of Finance (DOF) of private-sector projections on these two metrics.

“As promised last year, we continued our assessment of how analysts performed in their inflation and GDP growth forecasts. While we are happy to report the further deceleration of inflation in October and the surge in the country’s GDP growth in Q3 2019--which outpaced those of China, India and Indonesia--we are also pleased to report that the forecasts of private analysts have been improving lately.”

“We congratulate six analysts for getting the 0.8 percent inflation figure in October 2019 exactly right. We also congratulate Alex Holmes of Capital Economics for accurately predicting the GDP growth rate of 6.2 percent in the July-September period,” said Finance Undersecretary Gil Beltran.

“The DOF will continue to regularly monitor the GDP and inflation forecasts by private economists and analysts to help incentivize or encourage the use of better forecasting models on the economic front,” Beltran, who is also the DOF's chief economist, said. 

The DOF has analyzed the inflation forecasts of 14 analysts from institutions whose projections came out in the media. 

These analysts are Holmes of Capital Economics, Emmanuel Lopez of Letran Colegio de San Juan de Letran, Jessie Lu of Continuum Economics, Mitzie Irene Conchada of De La Salle University (DLSU), Robert Dan Roces of Security Bank Corp.  (SBC), vice Emilio Neri Jr. of Bank of Philippine Islands (BPI), Katrina Ell of Moody’s Analytics, Patrick Ella of Sun Life Financial Philippines, Mustafa Arif of Australia & New Zealand Bank (ANZ), Nicholas Antonio Mapa of ING Bank N.V., Michael Ricafort of Rizal Commercial Banking Corp. (RCBC), Jonathan Ravelas of BDO Unibank Inc., Romeo Bernardo of Globalsource Partners, and Alvin Ang of the Ateneo de Manila University (ADMU)-Ateneo Center for Economic Research and Development (ACERD).

Those who got October inflation right were Conchada, Roces, Neri, Ell, Ella and Arif. The least accurate forecast, with a deviation of 0.2 percentage points, was from Ang, whose estimate was 1.0%, vs the actual 0.8%. Ang had previously topped the list of most accurate inflation forecasts in the assessment done by the DOF in December last year.



Beltran said the Rice Tariffication Law (RTL), which liberalized the rice market and led to retail prices of rice falling by as much as P10 per kilo in some areas, contributed to the lowest inflation in 41 months, as well as the overall inflation environment in 2019.

Meanwhile, the DOF also assessed the Q3 GDP forecast performance of 13 analysts who had published their estimates. 

At first place was Holmes, the only analyst who accurately predicted Q3 GDP growth at 6.2 percent. 

Coming in second were Ruben Carlo Asuncion of Union Bank of the Philippines (UBP), with a forecast of 6.1%, and Mapa and Ricafort, with forecasts at 6.3%. Their forecasts deviated from the actual Q3 GDP figure by just 0.1 percentage point. The forecasts by Lopez (5.65%) and Ang (5.7%), had the largest deviation (0.5 percentage points or greater) from the actual.



On Q3 GDP growth, Finance Secretary Carlos Dominguez III is optimistic that, with the state spending on infrastructure and human capital development now on overdrive, the government could still hit the low band of its full-year growth target of 6-7 percent. 

Dominguez earlier said that Department of Budget and Management (DBM) data showed that the catch-up spending plan implemented by the state economic managers upon the instruction of President Duterte began to hit its stride in the third quarter as national government disbursements rose sharply in September by 39 percent—the fastest rate thus far for 2019—to P415 billion from P298.6 billion last year, or an increase of P116.5 billion.


He said the sharp increase in state spending, particularly on infrastructure development, showed that the Duterte administration has managed to break through the spillover effects of the delayed passage of the 2019 General Appropriations Act (GAA) plus the ban on infrastructure works during the summer elections, both of which induced a lag in economic growth in this year’s first semester.

He recalled that the 2019 budget delay had forced the government to hold off the implementation of new and ongoing projects as it underspent by roughly P1 billion per day during the first quarter and part of the second quarter, prompting the President’s economic team to eventually draw up a bold catch-up spending plan for the second semester.

Although it accounts for only 20 percent of GDP, state spending is crucial to growth, he said, because of its multiplier effects in stimulating the economy and creating jobs. 

Hence, Dominguez foresees an even better pickup in growth momentum in the year’s last quarter and into 2020, as the government meets its catch-up spending program before the yearend.

He expects a further surge in state spending this quarter and in the year ahead in light of these two positive developments in the Congress: (1) the likely passage of the 2020 General Appropriations Act (GAA) before the two chambers take their traditional yearend recess, and (2) the impending passage of a joint congressional measure extending by a year the validity of the 2019 budget, which was implemented only after President Duterte signed the GAA last April. 

“What the Philippines has shown is its strength, stability and resilience in the face of adverse conditions such as the global economic slump and the local budget delay,” he said.