Philippines may post above 4% growth in Q4 – UA&P

MANILA, Philippines — The Philippine economy may grow above four percent in the fourth quarter, supported by a rebound in infrastructure spending and stronger demand, according to the University of Asia and the Pacific (UA&P).

“While we expect GDP (gross domestic product) growth in Q3 (third quarter) much like the tepid 2.3 percent Q2 (second quarter) gain amid August floodings and delayed infrastructure spending, some green shoots have emerged,” UA&P said in the August edition of The Market Call Capital Markets Research.

It said that the record employment figure, export performance and overseas Filipino workers’ remittances in June are expected to shield the economy from temporary disruptions in the third quarter.

“These, together with a huge rebound in infrastructure spending in the fourth quarter, should bring the economy back to above four percent growth path,” UA&P said.

It also said that it expects growth to pick up in 2027.

“The return of government infra spending, softer crude oil prices and better demand conditions are tailwinds to watch out for,” UA&P said.

The economy grew by 2.6 percent in the first half, below the government’s revised 3.5 to 4.5 percent growth target for the year.

For 2027, the government is aiming to achieve its adjusted growth goal of five to six percent.

While the country posted record employment of 50.8 million in June, UA&P expects the employment gains to moderate as the historic minimum wage increase in the National Capital Region raises labor costs and reduces firms’ appetite to hire more.

It said that the minimum wage hike, along with the uncertain Middle East negotiation procedures, agricultural damage from heavy rains and a potentially aggressive El Niño, may keep inflation above target until 2027.

Inflation slowed to 6.1 percent in August from 6.2 percent in July.

Following the Bangko Sentral ng Pilipinas (BSP)’s move to raise rates by 25 basis points to five percent at its last meeting, UA&P said it expects one more 25-basis-point rate hike for the year.

In terms of remittances, UA&P said it expects low single-digit growth for the remainder of the year.

“If lingering host-country inflation and Middle East deployment friction persist, annual inflows may face downside risks relative to the BSP full-year cash remittance growth target of 2.7 percent ($36.6 billion),” it said.

Cash remittances in the first half reached $17.15 billion, up by 2.4 percent from $16.75 billion in the same period last year.

As for its local currency outlook, it said short-term pressures from oil price volatility and trade deficits may push the peso to 63 per dollar.