FMIC, UA&P see GDP rebound in Q2
MANILA, Philippines — Heightened state spending especially on infrastructure should charge economic growth in the second quarter of the year following a slowdown in the preceding three months, analysts at First Metro Investment Corp. and University of Asia and the Pacific said.
Lawmakers’ failure to pass the 2019 national budget on time and the election ban on public works froze new projects early this year, weighing on economic growth in the first quarter.
In a report released Thursday, FMIC and UA&P economists said they expect growth to “rebound” in the April-June period, adding that benign inflation and easing monetary policy should support consumer spending and private investment.
“The expected ramp-up in infrastructure and other [national government] expenditures should facilitate a rebound in Q2,” FMIC and UA&P analysts said in the May edition of their “The Market Call” report.
“Softer upticks in prices of key commodities, likewise, will provide extra boost. We think that the downtrend in headline inflation and cuts in the [Bangko Sentral ng Pilipinas’] policy rates and [reserve requirement ratio] will encourage higher investment and consumer spending starting Q2,” they added.
“Impact of El Niño on Q2-2019 will likely be less than in Q1. Besides, we are not seeing much growth in agriculture,” they continued.
Gross domestic product — or the value of all finished goods and services produced in the country — expanded 5.6% in the first three months of 2019, slower than 6.3% in the previous quarter and 6.5% recorded in the comparable period last year.
The latest reading was the slowest since 5.1% registered in the first quarter of 2015 and settled below the state’s 6%-7% annual target for 2019.
Socioeconomic Planning Secretary Ernesto Pernia blamed the four-month delay in passing the 2019 national budget for the economy’s disappointing performance in the first quarter. A spat among lawmakers stalled the approval of the new outlay, leaving fresh projects unfunded and crimping state spending, which accounts for a fifth of the country’s GDP.
The budget bill was signed into law in mid-April. Meanwhile, public works as well as the hiring and movement of government workers were prohibited from March 29 to May 12 due to the May 13 midterm elections.
In a bid power growth amid cooling inflation and tight liquidity conditions, the Bangko Sentral ng Pilipinas this month cut its benchmark rate by 25 basis points to 4.5% from a decade-high of 4.75%, and announced a three-step reduction in bank reserves to 16% from 18%.
To reach the state’s full-year target, Pernia said the economy would have to expand by an average of 6.1% over the next three quarters.
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