NEDA: COOLING INFLATION TO SPUR CONSUMPTION

GDP Q4 prospects improve

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The easing of inflation in November may encourage consumption and consequently boost economic growth during the rest of the year, Socioeconomic Planning Secretary Arsenio Balisacan said on Friday.

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Official data from the Philippine Statistics Authority (PSA) showed headline inflation in November slowed further to 3.7 percent from 4.3 percent in October, coming within the central bank’s forecast range of between 3.5 percent and 4.3 percent for the month, as well as private analysts’ estimates of between 2.5 percent and 4.1 percent.

The “inflation rate in November is very favorable to economic growth because inflation affects consumption. I think it should help boost growth in the fourth quarter,” Balisacan, who is also director-general of the National Economic and Development Authority (NEDA), said.

Given the slowing inflation results in recent months, the government expects the country’s headline inflation rate for full year 2014 will be within the 3 percent to 5 percent target range set by the Development Budget Coordination Committee, he said.

But adding a word of caution, Balisacan said: “The advent of the Christmas season, however, poses a possible uptick in food prices. Also, given the country’s vulnerability to disasters arising from natural hazards, the government needs to remain vigilant in ensuring adequacy of supply of commodities to keep prices stable.”

Nonetheless, Balisacan said economic activity in the Philippines is expected to remain firm given buoyant domestic demand, a strong external position and favorable consumer and business sentiment, which are expected to support the economy going forward.

The government is hoping gross domestic product (GDP) will grow by at least 8.2 percent in the fourth quarter to push full-year 2014 growth to at least the low end of the 6.5 percent to 7.5 percent target range.

Earlier this week, ING Bank Manila said the fourth quarter of 2014 will show improved government spending, which should make up for the slowdown in the third quarter and allow the country’s GDP to grow 5.8 percent this year.

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