The second quarter of 2015 showed early signs of a more defined recovery in the Philippine economy from the slowdown seen in the first quarter, the latest joint report of think tanks First Metro Investments Corp. (FMIC) and the University of Asia and the Pacific (UA&P) said.
The FMIC-UA&P’s July issue of The Market Call said the country’s economy appears headed for a more upbeat second-quarter performance given increased government spending and a low-inflation environment.
Headline inflation in the second quarter has been reported down at 1.7 percent, falling below the 2-percent to 4-percent target range set by the central bank, as price increases in food and non-food items decelerated.
“Below-target headline inflation, pulled down by stable to lower food prices, should encourage more consumer spending in the second quarter onward,” the study said.
For the third quarter, the think tanks expect inflation to trek downward due to stable food prices and soft oil prices, with the rate likely to average at below-target 1.5 percent.
FMIC and UA&P pointed out that infrastructure spending by the national government also signaled a rebound from underspending in the first quarter.
The official figures for June have yet to be released by the Department of Budget and Management, but aggregate figures in April and May on government spending for infrastructure and other capital outlays showed growth of 34 percent year-on-year to P47.2 billion.
In the first quarter of 2015, the government underspent by 11 percent as disbursements dropped to P68.5 billion from a year earlier.
“…We do think that the aversion toward underspending in the context of an upcoming Presidential elections would lead to a sustained increase in national government spending, especially, for infrastructure,” the paper said.
“The more optimistic outlook is bolstered by a seasonally adjusted annualized net job creation of 1.3 million in April compared [with]January 2015,” it added.
Separately, the Labor Force Survey of the Philippine Statistics Authority showed the employment rate in April rose to 93.6 percent from 93 percent in the corresponding month last year and from 93.4 percent in January 2015.
Despite this, the FMIC and UA&P said they see some mixed signals from the real sector indicators, such as in industrial production, which is likely to be lower than 5 percent in the second quarter.
“Although there are still some negative signals, on balance the outlook looks more promising,” the paper concluded.