Moderating inflation and sustained export gains may drive Philippine economic growth in the second half of the year beyond the 6 percent recorded for the first six months, a joint think tank report said on Monday.
First Metro Investments Corp. (FMIC) and the University of Asia and the Pacific (UA&P) forecast in their November issue of The Market Call that the country’s gross domestic product (GDP) will grow between 6.5 percent and 7 percent in the last six months of 2014.
“With inflation peaking at 4.9 percent in July and August as food prices have started to fall, and [with]crude oil prices falling to four-year lows and exports expanding at a double-digit pace so far in the second half, our outlook for a significantly better second half appears well grounded,” they said.
The report noted the cooling of headline inflation in September to 4.4 percent year-on-year as food prices stabilized and crude oil prices slumped in the international markets.
The arrival of additional imported rice and the start of the delayed harvest season by mid-October, as well as the lifting of the truck ban in Manila, have put downward pressure on food prices, they said.
“This positive development – a third consecutive month of double-digit export growth in August, and solid economic numbers for the US economy, have rekindled optimism for the rest of the year and 2015,” it added.
The FMIC-UA&P report stressed that despite the fact only the US economy has been showing solid gains, Philippine exports have been rising more than 10 percent year-on-year. The think tank expects the trend to continue until the end of the year and beyond.
“All told, with domestic demand picking up and exports doing better than expected at the back of solid gains in the US economy, output growth in the second half should easily beat the 6 percent GDP expansion posted in the first half,” the report said.
However, the report highlighted the government’s underspending which it said provides downside risk for the economy.
“The fly in the ointment was the low budget deficit of P5.2 billion in September, suggesting underspending, even though disbursements growth for the month was 9 percent, an acceleration from 4 percent in August,” the report said.
These figures, however, could not offset the 15 percent fall recorded in July. The national government seems to be more confident in accelerating its spending, while keeping corruption at a minimum, FMIC and UA&P added.
“With the cumulative fiscal deficit as of September at only 10 percent of the full-year target, and the national government having more detailed plans for the reconstruction work in Typhoon Yolanda-stricken areas, acceleration in government spending that started in August should easily continue until the fourth quarter,” the report concluded.