Inflation for the year may have peaked and government spending is expected to show a definite upward trend in the second half—clearing the way for a stronger rebound for the Philippine economy before the end of 2014, a joint financial institutional study said on Wednesday.
First Metro Investments Corp. (FMIC) and the University of Asia and the Pacific (UA&P) earlier forecast that the country’s economic growth could return to the 7 percent level in the second half of the year from the 6 percent gross domestic product growth for the first six months.
“It would appear that the remaining stumbling blocks for an even stronger rebound in the second half are the relatively high inflation rate and the national government’s underspending,” said the joint study released Wednesday by the FMIC and the UA&P.
The study gives further basis for the optimism:
President Benigno Aquino 3rd has asked Congress for a supplementary government budget that would offset the cutting off of the controversial Disbursement Acceleration Program (DAP) funds, it said.
The FMIC and UA&P also see easing price pressures, forecasting that inflation for the year has already peaked, noting that rice harvests started in September and 500,000 MT of new imports of the grain will begin arriving this month.
“Besides, crude oil prices have broken through their strong support levels both in the US (WTI) and Europe (Brent) and are likely to continue their downward trend until the first half of 2015,” it added.
In the September issue of “The Market Call,” FMIC and UA&P noted that July inflation rose to 4.9 percent amid an unabated upswing in food prices, the highest in more than two years.
In terms of fiscal performance, the report said the national government’s deficit for the first seven months of the year totaled P55.7 billion, or less than a quarter of its full-year target of P266 billion.
The FMIC and UA&P joint report added that while revenue gains remained robust, expenditures fell in July as national government agencies tightened their screening processes in the wake of Supreme Court’s declaration of unconstitutionality in some parts of the DAP.
“We, however, see these two main concerns addressed in the second half,” it said.
The report also mentioned that the lifting of the truck ban in the City of Manila
should ease the flow of food items to Metro Manila and other parts of the country.
In addition, the report also highlighted that the relaxation of the truck ban and stronger global manufacturing activity should also help sustain export growth—another contributor to economic growth.
“We expect exports to record robust growth in H2 with the US economy showing solid signs of recovery, especially in job creation. Anticipation of modest growth in both EU and China further supports our optimism,” it said.