Moody’s Analytics expects 5.1% GDP in Q3
Analytics forecasts a higher Philippine gross domestic product (GDP) growth of 5.1 percent for the third quarter and also estimates a lower inflation rate for October of 5.7 percent versus 6.1 percent in September.
The government will announce the consumer price index (CPI) first on Tuesday, Nov. 7 and the GDP third quarter report on Thursday, Nov. 9. Both prices and economic indicators are crucial for the Nov. 16 Monetary Board policy rate decision of the Bangko Sentral ng Pilipinas (BSP).
Moody’s Analytics’ 5.1 percent growth projection is higher than actual GDP growth in the second quarter of 4.3 percent. Meanwhile, its 5.7 percent CPI forecast for October is within the BSP’S own 5.1 percent to 5.9 percent inflation forecast.
In its weekly Economic View: Asia Pacific commentary, Moody’s said they expect GDP growth to improve due to higher spending by the Philippine government.
“We look for a 5.1% year-onyear reading—an improvement from the 4.3% growth in the prior quarter. We expect government spending to lift on account of state agencies stepping up the implementation of certain projects, but elevated inflation and high interest rates will weigh on consumer spending,” said Moody’s Analytics.
BSP Governor Eli M. Remolona Jr. has said that the October inflation rate may be lower compared to September’s 6.1 percent “but not as much as we used to expect.”
In announcing an October CPI forecast range of 5.1 percent to 5.9 percent, the BSP said the reason is the decrease in oil prices and selected food items such rice, meat and vegetables.
It also noted that the upside factors that could pull CPI higher for the month of October are the higher prices of electricity, LPG, fruits, and fish. The recent adjustment in jeepney fares and higher electricity are also upside risks.
As of end-september, the average inflation is at 6.6 percent, way above the two percent to four percent BSP target.
The headline CPI rose in September to 6.1 percent versus 5.3 percent in August, but still
within the BSP’S forecast range at the time of 5.3 percent to 6.1 percent for the month.
In September though, core inflation which excludes selected volatile food and energy items to measure underlying price pressures, eased further to 5.9 percent from 6.1 percent last August. The BSP said it will “closely monitor developments affecting the outlook for inflation and growth in line with its data dependent approach to monetary policy formulation.”
The Monetary Board,
BSP’S policy-making arm, will meet on Nov. 16 to discuss whether or not to do another rate hike as a follow up on the Oct. 26 off-cycle policy action, or to hold the key rate steady at 6.5 percent.
Meanwhile, analysts have mixed predictions on the BSP rate. Some expect the BSP to tighten the target reverse repurchase (RRP) rate further from 6.5 percent to an 18-year high of seven percent to combat a persistently high inflation. Others expect the BSP to keep the rate at 6.5 percent.
Remolona said last Oct. 27 that it is still a toss up whether or not they will continue to hike the policy rate this month. If they do raise interest rates again, this will be in reaction to a high October inflation and a slower-than expected GDP growth in the third quarter.