MANILA, Philippines — The Philippine economy may improve in the second half of the year despite the slower-than-expected growth posted in the April-June period, but not without “bumps,” particularly in the inflation front.
In its September report, economists at First Metro Investment Corp. and University of Asia and the Pacific said they “remain optimistic” for an economic “rebound” in the second half despite the surprise slowdown in the second quarter.
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“Other economic drivers that will further push [economic] expansion better than growth in [first half] include: strong [national government] disbursements and higher peso equivalent of the remittances, stronger infrastructure and capital outlay and better exports,” FMIC and UA&P analysts said.
Gross domestic product—or the value of all finished goods and services produced in the country—sharply eased to 6.0 percent in the second quarter, the slowest pace since the similar 6.0-percent expansion recorded in the third quarter of 2015.
In the first half of 2018, the economy grew 6.3 percent.
Philippine policymakers have been concerned about spiraling inflation, which rose to a nine-year high of 6.4 percent in August.
Some analysts expect economic growth to continue to decelerate over the second semester of the year as tighter monetary policy and higher inflation weigh on consumer spending, which accounts for about seven-tenths of the Philippine economy.
In a bid to combat inflation and strengthen the Philippine peso, the Bangko Sentral ng Pilipinas has delivered back-to-back rate hikes from May to August and vowed to undertake “strong action” in its policy review on Thursday.
“Robust investment spending will largely contribute to faster growth in Q3 but may be tempered by higher consumer prices,” said FMIC and UA&P analysts, who expect the BSP to lift its key rate by another 50 basis points on Thursday.
“Latest inflation data, and months prior to it, showed a fast price acceleration; which is seen to keep Q3 PH expansion at the lower end of our forecast,” they added.
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— Ian Nicolas Cigaral