GDP growth likely at slower pace in H2

MANILA, Philippines - Economic growth in the second half of the year may be lower compared to the first semester, but full year gross domestic product (GDP) could still hit 6.3 percent, according to Metrobank’s research department.

In the second quarter of the year, the economy grew a high seven percent compared to the 5.9 percent expansion posted in the same period last year.

First quarter GDP, however, was revised downward to 6.8 percent, making the first half average at 6.9 percent.

“Research expects the growth for the second half of the year to be lower than the first half as the boost from election spending fades and base effects from the strong growth in the third quarter and fourth quarter of 2015 kick in,” Metrobank said in its report.

Nevertheless, it expects consumption spending to remain robust amid the still soft commodity prices, low interest rates and solid remittance inflows.

“Election spending is seen to have supported key services such as transportation, communication and storage, business activities and retail trade. The slight improvement in the electronics exports toward the end of the year is expected to further underpin the manufacturing sub sector growth,” Metrobank said.

In its report, Metrobank said the Philippines was still the fastest economy in the Southeast Asian region, surpassing the 6.7 percent first half growth in the region.

However, Metrobank noted that risks to the domestic economy remained, coming from uneven economic growth and impact of financial market volatilities.

Such uncertainties could put pressure on the peso, Metrobank said.

“The volatile period is not to be discounted as investor sentiment could easily make a turnaround given the still uncertain outlook for the global economy. The local currency could still come under pressure toward the end of the third quarter,” Metrobank said.

It expects the peso to end the year at P48 against the dollar with an appreciation bias toward P46.50 if there are no Fed rate hikes this year while average inflation forecast is seen at two percent.