2H GDP seen averaging 6.4%
The economy is expected to return to full form as growth is derived from all sectors of the economy: consumption, capital formation and government spending
Local output growth, measured as the gross domestic product (GDP), was seen averaging higher in the second half and help government meet its growth target.
This was learned from ING Bank senior economist Nicholas Mapa who said continued expansion across the $314 billion economy is seen averaging 6.4 percent in both the third and fourth quarters of the year.
This represents a ramp up from growth averaging only 5.6 percent and 5.5 percent in the first and second quarter, respectively.
“Looking forward to third quarter and fourth quarter, we still expect a strong showing to help the Philippines achieve a photo finish 6.4 percent in the second half and a full year expansion of 6 percent to keep the streak (of above 6 percent growth) alive,” Mapa said in an email.
According to him, the economy is expected to “return to full form as growth is derived from all sectors of the economy: consumption, capital formation and government spending”.
He likewise said the economy will benefit from a favorable base of 6 and 6.3 percent GDP in the last two quarters of 2018.
Household consumption, which accounts for more than 60 percent of the economy, was expected to “bounce back nicely” given inflation slipping below 2 percent amid stable supply side conditions.
In addition, capital formation or investments was seen to rebound in the second half amid the Bangko Sentral ng Pilipinas’ (BSP) recent policy rate easing. The rate at which it borrows from banks peaked at 4.75 percent at the 15 November rate-setting meeting a year ago.
“With BSP moving quickly to dial back the 2018 aggressive hike cycle, we can expect the investment momentum to rebound with early signs shown in the recent pickup in road vehicle sales for the month of July,” Mapa said.
“Furthermore, favorable borrowing costs and the budget passage will help bolster overall construction momentum as both public and private construction efforts accelerate,” he added.
The drastic drop in government spending brought about by the budget delay was seen to recover in the second half as government sustains its catch-up strategy.
“The growth story is completed by government spending coming to life as the 2019 budget is unleashed. Further evidence of spending getting off quickly is the roughly P150 billion drawdown in the BSP’s Treasury Single Account in two months after the budget signing as the government opens the flood gates for the funds previously trapped with the BSP,” Mapa said.
“With all three sectors humming along, the Philippines will return to its peak form where growth is firing on all cylinders as the Philippines chases the 6 percent handle,” he concluded.
To recall, the government’s most senior economic officials said that achieving the 6 to 7 percent growth target remains doable and within reach.