GDP growth likely exceeded 7% in Q2

BSP indicators point to faster pace than in Q1

MANILA, Philippines – The country’s gross domestic product (GDP) growth likely accelerated in the second quarter of the year, a ranking official of the Bangko Sentral ng Pilipinas (BSP) said yesterday.

BSP Deputy Governor Diwa Guinigundo said the GDP grew faster in the second quarter compared to the 6.9 percent expansion registered in the first quarter of the year amid robust consumer spending and higher investments. 

“It looks like that it can be higher on the basis of the indicators that we’re seeing. All indications would point to a more robust economic growth in the second quarter of 2016,” he said.

The country’s GDP grew faster at 6.9 percent in the first quarter of the year from the revised 6.5 percent in the fourth quarter of last year amid accelerated public consumer spending, as well as increased fixed capital outlook on domestic spending.

Guinigundo also cited the impact of election-related spending.

“It should be higher than 6.9 percent because of the latest readings that we saw,” he added.

Zeno Ronald Abenoja, director of the BSP’s Department of Economic Research, said high-frequency indicators of demand continued to suggest an optimistic outlook on domestic spending.

Abenoja said vehicle sales remained brisk while the composite Purchasing Managers’ Index (PMI) stayed above the 50-point expansion threshold.

According to Abenoja the PMI stood at 55.3 in April while the volume of production index (VoPI) grew faster at 10.5 percent in April from 8.9 percent in March. The average capacity utilization rate of the manufacturing sector also remained above 80 percent at 83.4 percent in April.

The National Economic and Development Authority (NEDA) earlier said factory output expansion would be sustained as demand typically increases in the second quarter due to the summer as well as enrollment seasons.

Vehicle sales zoomed 30.7 percent in the first two months of the second quarter while energy sales of Manila Electric Co. (Meralco) grew 12.7 percent in the first two months of the year.

Based on the Q2 2016 Business Expectation Survey (BES) and Q2 2016 Consumer Expectation Survey (CES), business as well as consumer sentiments were bullish in the second and third quarters.

“Business sentiment improved while consumer sentiment was broadly steady, supporting the view that demand conditions would remain firm moving forward amid sustained credit growth and notable improvements in employment conditions,” Abenoja said.

Guinigundo reiterated the country’s monetary policy stance remained appropriate amid the robust domestic demand as well as the benign inflation environment.

The BSP has set an inflation target of between two and four percent. Inflation averaged 1.3 percent in the first half of the year.

He pointed out the current monetary policy settings remain appropriately calibrated.

“With manageable inflation dynamics, low inflation expectations, and favorable prospects for domestic demand, the stance of monetary policy can continue to be kept steady for the near term,” he said.

The BSP has kept interest rates steady for 14 straight rate-setting meetings since October 2014.