Economic growth likely recovered to 6% in Q2

MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) said the economy likely grew by about six percent in the second quarter after easing to a four-year low of 5.6 percent in the first quarter.

BSP Deputy Governor Diwa Guinigundo told reporters on the sidelines of the 2019 pre-State of the Nation Address (SONA) economic and infrastructure forum the robust consumer spending and a catch up in government spending translated to a higher gross domestic product (GDP) growth in the second quarter.

 “Well government spending is very important. With lower inflation, consumption expenditure will be stronger. And with low inflation and low interest rate, private investment will also be an important driver of economic growth,” he said.

The budget impasse pulled down the GDP growth to 5.6 percent in the first quarter from 6.3 percent in the fourth quarter of last year.

The administration has adopted a catch up plan particularly for infrastructure projects under the Build Build Build program as President Duterte only signed the 2019 national budget last April 15.

 “The national government is putting up a catch up program so that the tight situation in the first and second quarters can be addressed by the third and fourth quarters,” Guinigundo said.

According to Guinigundo, GDP growth usually picks up during the third and fourth quarters.

 “If you have a 5.6 percent in the first quarter, second quarter around six percent, third and fourth quarters which are normally the high growth quarters, there will be a catch up,” he said.

Economic managers through the Cabinet-level Development Budget Coordination Committee (DBCC) lowered the GDP growth forecast for this year to a range of six to seven percent primarily due to the delayed passage of the 2019 national budget.

ANZ Research said it expects the GDP growth to further slow down to six percent this year after easing to 6.2 percent in 2018 from 6.7 percent in 2017.

 “We continue to expect GDP growth at six percent in 2019. Although private consumption is likely to remain firm, public expenditure and investment are not likely to recover until Q3,” ANZ said in its Asia Economic Outlook Q3 2019.

ANZ said the silver lining to the growth slowdown is that it can help arrest some of the underlying imbalances in the Philippine economy including imports, credit and inflation.

The investment bank sees inflation easing to 2.7 percent this year before accelerating to three percent next year.

Inflation kicked up to 5.2 percent in 2018 from 2.9 percent in 2017 and exceeded the BSP’s two to four percent target due to elevated oil and food prices as well as weak peso.

Echoing the BSP’s projection, First Metro Investment Corp. (FMIC) said economic output likely recovered with a six percent growth in the second quarter of the year, markedly stronger than the growth pace in the first quarter.

In its latest Market Call report with the University of Asia and the Pacific (UA&P) Capital Markets Research, the investment banking arm of the Metrobank Group said this growth pace should be enough to revive interest in the economy.

“Although we think the economy will recover in Q2, the high base a year ago and the weak numbers for April, the pace may hover around six percent, good enough to revive sentiment in all economic players,” FMIC said.

This compares with the 6.2 percent growth in the second quarter last year and 5.6 percent in the first quarter this year.

FMIC said it also sees inflation falling below three percent in June and below the two percent mark by September after accelerating anew to 3.2 percent in May.

“Inflation should resume its downward slide with crude oil prices (Brent) down by seven percent in May year-on-year and still falling in June,” the report said.

“The collapse in crude oil prices into bear market territory (low $50 for West Texas Intermediate) support a more fundamental easing of the inflation rate for Q3,” it added.

Sought for comment yesterday, Socioeconomic Planning Secretary Ernesto Pernia said he expects June inflation to clock in at 2.8 percent. 

He also reiterated his earlier assumption that growth in the second quarter is expected to have settled at around six percent, supported by election related spending, but still reflecting the delay in the passage of the 2019 national budget. 

The 2019 budget was only enacted in April, causing the government to operate on a reenacted budget for the first three months of the year.

After the budget’s passage into law, economic managers subsequently rushed to formulate a catch-up plan for spending on government programs and infrastructure projects.

The Philippine Statistics Authority is announcing the June inflation figures on July 5. – With Czeriza Valencia