FMIC/UA&P: Philippine economy grew by 6.1 percent in Q1

MANILA, Philippines — The Philippine economy is expected to post a faster 6.1-percent growth in the first quarter to be supported by higher infrastructure spending, according to First Metro Investment Corp. and University of Asia and the Pacific.

“The economy looks set to accelerate in 2024 with Q1 (first quarter) GDP (gross domestic product) growth estimated at 6.1 percent as infrastructure spending goes into high gear with national government, buoyed by ODA (official development assistance) funding and PPP (public-private partnership) projects gain traction,” FMIC and UA&P said in the Market Call report for March.

If FMIC and UA&P’s forecast is realized, the country’s first quarter growth would be faster than the 5.6 percent expansion posted in the fourth quarter last year.

As national government spending reached P5.34 trillion in 2023 and exceeded the programmed P5.23 trillion, FMIC and UA&P said they expect the government to ramp up infrastructure spending this year to support economic growth and job creation.

They said inflation, which is expected to average 3.2 percent in the first quarter and be within the government’s two to four percent target, is also seen to support the first quarter GDP forecast.

“We also don’t see a repeat of the February inflation spike as rice prices abroad had begun to ease while crude oil prices have little upside given the weak China economic recovery and surplus capacity in both OPEC (Organization of the Petroleum Exporting Countries) and non-OPEC countries,” FMIC and UA&P said.

Inflation accelerated to 3.4 percent in February from 2.8 percent in January, snapping a four-month downtrend due to faster increases in food prices and transport costs.

Bangko Sentral ng Pilipinas Governor Eli Remolona Jr. earlier said inflation would likely accelerate further to 3.9 percent in March from the previous month due to base effects.

National Economic and Development Authority Secretary Arsenio Balisacan, however, said March inflation is unlikely to be higher than last month’s citing the slow progress on the proposed legislation for a wage increase.

While inflation may reach 3.7 percent in the first semester, FMIC and UA&P said it should return to under 3.5 percent by the third quarter.

For 2024, FMIC and UA&P said they are sticking with their average inflation forecast of 3.8 percent.

FMIC and UA&P also said the country’s exports are likely to rebound this year, with January’s faster-than-expected growth underpinned by robust US economic growth and Eurozone’s rally.

“We should see a modest five to 10 percent increase in exports for 2024 as the global economy recovers,” they said.

The value of the country’s exports of goods declined 7.6 percent to $73.53 billion in 2023 from $79.57 billion in 2022.

Last January, the country’s exports rose by nine percent to $5.94 billion from $5.44 billion in the same month in 2023.

With imports to remain elevated, FMIC and UA&P also said this year’s trade deficit is expected to be similar to 2023.

“The trade deficit will remain above $4 billion per month on average,” FMIC and UA&P said.

The country’s trade deficit narrowed to $52.63 billion in 2023 from $57.65 billion in 2022.

The country’s trade deficit amounted to $4.22 billion in January, 24 percent lower than the $5.56 billion in the same month last year.

“The peso will likely have a brief appreciation run until May, but would resume to fall as economic growth takes a faster pace,” FMIC and UA&P said.