MANILA -- The Philippine economy grew 5.6% in the first quarter of 2019, missing the government's target as a budget impasse at the start of the year weighed on the country's overall output.
Gross domestic product in the first three months of the year rose at its slowest pace in four years and marked the first time in 16 quarters that the Philippine economy expanded at less than 6%, the Philippine Statistics Authority said on Thursday. The country's GDP growth also fell below the government's 6% to 7% target range for 2019.
The benchmark Philippine Stock Exchange Index dropped nearly 2% in morning trading after the GDP report was announced.
The slowdown could prod the Bangko Sentral ng Pilipinas, the central bank, to ease monetary policy on Thursday afternoon to help boost economic growth. Calls to cut interest rates have grown among some economists as inflation has returned to the central bank's 2% to 4% target range after six straight months of easing consumer prices.
The government operated on a "re-enacted" budget at the start of the year after a congressional impasse delayed the approval of the government's 3.76 trillion peso ($72.3 billion) spending plan. Building new infrastructure projects and the scheduled pay increase of government workers were suspended until President Rodrigo Duterte signed the appropriations law in April.
Socioeconomic Planning Secretary Ernesto Pernia said on Thursday that the economy would have expanded 6.6% if Congress had passed the budget on time.
"As we have forewarned repeatedly, the re-enacted budget would sharply slow the pace of economic growth," he said.
As a result of the budget delay, public spending growth -- which contributes a fifth to overall GDP -- slowed to 7.4% from a year earlier after growing 14% in the same period last year. Consumer spending remained the main economic driver, growing 6.3% on the year.
The Bangko Sentral ng Pilipinas is expected to factor in first quarter GDP when it reviews monetary policy later on Thursday. The central bank will announce its decision on monetary policy at 4 p.m. local time.
In 2018, the central bank raised its key interest rate to the highest level in a decade, by 175 basis points to 4.75% to curb rising domestic prices, which were at their highest in as many years.
In March, the central bank kept rates steady but several economists expect the central bank to reverse course and begin to ease monetary policy.