Unicapital expects faster economic growth in Q2

MANILA, Philippines —  The Philippine economy is expected to grow faster in the second quarter than the previous quarter due to election spending and low inflation, according to financial services provider Unicapital Group.

Unicapital Securities Inc. president and CEO Ben Thomas Pañares told The STAR the economy likely expanded at a faster pace in the second quarter compared to the first quarter’s 5.4 percent growth.

“It’s likely going to be better,” he said.

While the first quarter gross domestic product growth was slightly faster than the previous quarter’s 5.3 percent expansion, it was slower than the 5.9 percent growth in the same period last year.

The first quarter growth performance also fell below the government’s six to eight percent target for the year.

“We do view that there’s a lot of positives going on, at least in Q2 (second quarter),” Pañares said.

He said factors that may drive faster economic growth in the second quarter include spending related to the elections held last May.

He also said consumer spending is expected to continue to support growth in the second quarter.

“I think what’s more important is that inflation is still low,” he said, noting this may lead consumers to make more purchases.

Latest data from the Philippine Statistics Authority showed that inflation continued to ease in May to 1.3 percent, its lowest level in over five years or since the 1.2 percent registered in November 2019, due mainly to the downtrend in utility costs.

Inflation has been on a downtrend since February this year.

Average inflation from January to May was at 1.9 percent, slightly below the government’s target range of two to four percent.

Given low inflation, Pañares said the Bangko Sentral ng Pilipinas (BSP) is likely to continue its rate cuts.

At its April 10 meeting, the BSP reduced the key policy rate by 25 basis points to 5.50 percent.

The BSP is set to hold its next monetary policy meeting on June 19.

Pañares said the reciprocal tariffs imposed by the US on trade partners, however, are expected to affect the country’s economic performance.

“It’s sort of a double-edged sword. It helps us in one way and it may directly impact us,” he said.

While it may lead to a reduction in the country’s exports to the US, he said it may also encourage firms to consider setting up operations in the Philippines due to the lower tariff imposed on the country.

Before the 90-day pause on the reciprocal tariffs and the implementation of the baseline levy of 10 percent for most countries came into effect, the US imposed a 17-percent reciprocal tariff on Philippine exports, the second lowest in Southeast Asia.