The Philippine economy likely grew 6.5 percent in the second quarter of the year, gaining some momentum back after slowing in the first quarter and despite a high base in 2013, according to an estimate by a pair of leading think tanks in the country.
The quicker growth pace estimated for the second quarter this year is expected to show a corresponding increase in employment, which should have offset the negative impact of higher inflation and weaker exports during the period, said the First Metro Investments Corp. (FMIC) and the University of Asia and the Pacific (UA&P) in the July issue of The Market Call, their joint publication. The new FMIC and UA&P economic growth projection is a revision of their previous 6.3-percent forecast for the period.
“Despite an acceleration in inflation to 4.5 percent in May and a slowdown in exports in April, second-quarter GDP [gross domestic product]growth may surprise on the upside, considering the 1.6 million jobs created in the year ending April 2014, and double-digit growth of 12.8 percent in industrial output for the same month,” the report said.
The jobs data provided the best news that has come out during the quarter, since growth in employment is conducive to a virtuous cycle of employment-income-spending, it said.
Data on labor and employment showed encouraging growth of 4.5 percent in April, pushing total employment to 38.7 million, compared with 37.0 million in April 2013.
At the same time, the study pointed to a slower-than-expected rise in remittances by overseas Filipino workers (OFW).
“Even though OFW remittances slowed down in US$ terms, the peso equivalent still posted double-digit gains due to the peso depreciation over last year,” FMIC and UA&P said in the report.
OFW cash remittances weakened in April, registering a 5.2 percent year-on-year increase or $1.9 billion in May—which was 0.7 percentage points and 1.3 percentage points lower than the year-earlier and month-ago levels.
Hefty fiscal surplus
The FMIC and UA&P said a cumulative fiscal surplus of P8.9 billion in May leaves open the likelihood of accelerated spending for the rest of the year.
“Thus, we may still see GDP growth in the second quarter hit 6.5 percent despite the high base in 2013,” they said.
In the first quarter, GDP posted a slower-than-expected 5.7 percent expansion, falling far behind its year-earlier growth pace of 6.3 percent.