GDP likely grew by 6% in Q3 — FMIC

Economic growth in the third quarter likely accelerated to six percent due to the pickup in both domestic demand and government spending, a report by First Metro Investment Corp. (FMIC) and University of Asia and the Pacific (UA&P) said.

In their latest Market Call report, the investment banking arm of the Metrobank Group and UA&P Capital Markets Research said the benign growth in inflation and lower interest rates will help boost growth faster in the fourth quarter.

“We see growth accelerating to six percent in Q3 and faster in Q4, as domestic demand revs up further,” the report said.

“Positive economic data point to a rebound in H2, bolstering our view that full-year GDP expansion will hover between six percent to 6.5 percent. Lower interest and inflation rates should continue to drive investment and consumer demand. Besides, we see signs that national government can ramp up infrastructure spending for the rest of the year, further boosting growth,” the report added.

In line with the government’s catch-up plan to boost spending after the passage of the national budget in mid-April, public spending rose by 39 percent as of September, with disbursements rising to P415.1 billion from P298.6 billion in September 2018.

Inflation has also been decelerating, falling to a 40-month low of 0.9 percent in September as the cost of food, housing and utilities contracted.

As of September, public spending on infrastructure surged by 54 percent in September as state agencies fasttracked the implementation of projects as part of the catch-up measures for spending.

Infrastructure spending and other capital outlays amounted to P100.3 billion in September, up from P65.2 billion in the same month last year.

“Inflation should remain subdued as we expect a repeat 0.9 percent in October and Q4 to average 1.6 percent. Downward adjustments to full-year inflation projections keep resurfacing, but we expect it not to exceed 2.5 percent,” the report said.