PH economy likely grew 6% in Q2
The Philippine economy likely expanded by 6 percent in the second quarter and is poised to accelerate further all the way until yearend, supported by strong consumer, government, and investment spending.
A joint report by the First Metro Investment Corp. (FMIC) and the University of Asia and the Pacific (UA&P) said the “tri-star domestic demand engines” are positioned to “speed up the Philippine economic machine” starting April to June, boosted by plunging inflation and the national government’s (NG) catch-up spending plan.
In the latest issue of the Market Call, FMIC and UA&P pointed out they expect a renewed sharp fall in headline inflation to below 2 percent by August, and even below 1.5 percent especially with base effects, due to lower rice and other food prices.
“The 13 consecutive months of over-20 percent growth in infrastructure spending (from October 2017 to November 2018) should constitute sufficient evidence that the NG can ramp up spending for the rest of 2019,” it added.
The country’s gross domestic product (GDP) slowed down to 5.6 percent in the first quarter, which the FMIC and UA&P considered a “blip” as it was mainly driven by the decline in public construction due to the delay in the 2019 national government budget approval.
“Private investments look robust as well with major Public-Private Partnership (PPP) projects in full swing, and bond yields (and interest rates) moving down to 4.5 percent should renew residential construction and durable goods spending,” they added.
The report further said lower interest rates and the slight improvement in the external trade data should likewise further drive growth to a higher trajectory.
FMIC and UA&P expected a minimum 25 basis points (bps) cut in United States Fed’s policy rate in July.
The additional trimming of Bangko Sentral ng Pilipinas’ policy rate by 50 bps and the required reserve ratio (RRR) by 200 bps in second half of the year will “add fuel to growth --in the real economy and financial markets”, they said.