Economy likely grew faster in Q3 – Moody’s

The Philippine economy likely grew at a much faster pace in the third-quarter of the year owing to strong investments along with broader domestic demand, the research arm of debt watcher Moody's said.

According to Moody’s Analytics, the country’s economy, as measured by its Gross Domestic Product (GDP), may have expanded by 6.3 percent in the quarter ending September.

Moody’s Analytics’ projection is higher than the six percent GDP registered in the second-quarter, but below the government’s revised target for the year of 6.5 percent to 6.9 percent.

The research firm noted that “manufacturing slowed in the third quarter, but investment and broader domestic demand were relatively upbeat, providing some offset.”

The manufacturing growth eased in the third quarter bringing the average to 51.6 percent based on the Nikkei Philippines Manufacturing Purchasing Managers' Index. This is lower compared to end-June.

In October, the inter-agency Development Budget Coordination Committee (DBCC) lowered the country’s GDP projection for 2018 from an earlier estimate of around seven percent to eight percent.

Despite the revision in this year’s GDP projection, the DBCC kept its target at seven percent to eight percent for next year until 2022.

Budget Secretary Benjamin E. Diokno, who is also the DBCC chair, said the adjustment aims “to reflect developments at the national and global level, including higher world oil prices, tightening of monetary policy in advanced economies, and higher domestic inflation.”

At end-June, the country’s GDP averaged at 6.3 percent.

“Despite softer GDP growth we expect the Bangko Sentral ng Pilipinas to

deliver another 25-basis point interest rate hike by the end of the year to try to tame inflation,” Moody’s Analytics said.

Currently, the rate of increase in consumer prices is already hovering near seven percent amid weakening local currency, high global crude prices, and earlier adverse weather disrupting fresh produce supplies.

The DBCC adjusted its inflation forecast for 2018 to 4.8 percent to 5.2 percent versus the target of two percent to four percent.

Economic managers also raised the inflation forecast for 2019 to around three percent to four percent, while from 2020 to 2022, the DBCC maintained the range at two percent to four percent.

“We are optimistic that the administration has taken enough measures to tame inflation in the last quarter of 2018 and the full year of 2019,” said Diokno.

He said the revision is “consistent with the government’s assessment that inflation will go back to the target level by next year.”

The headline inflation clocked in at 6.7 percent in September, quicker compared with 6.4 percent in August and three percent in the previous year.

The September inflation rate brought the nine-month average to five percent, above the government’s target.