The robust 6.9 percent pace of growth in the Philippine economy in the first quarter of 2016 is likely to continue in the second quarter, driven by more government spending, a private think tank report said.
“Inflation is likely to average only slightly faster in the second quarter to 1.4 percent, which is still way below the 2-percent to 4-percent target of the Bangko Sentral ng Pilipinas (BSP),” investment bank First Metro Investments Corp. (FMIC) and the University of Asia and the Pacific (UA&P) said in their latest joint issue of The Market Call.
FMIC and UA&P said low inflation would allow consumers greater leeway to increase spending especially with the additional boost provided by election spending in April and May.
“Government spending is likely to accelerate in the second quarter, centered on the elections even as more infrastructure projects continue, while big-ticket PPP [public-private partnership] projects are beginning to take-off,” they also pointed out.
In particular, the report cited the construction of the Metro Rail Transit Line 7 (MRT- 7), which officially began with the groundbreaking ceremony on April 20.
The P69.3 billion project involves the construction on of a 23-kilometer railway system that will link North Avenue, Quezon City (common terminal with LRT-1 and MRT-3) to San Jose del Monte, Bulacan.
Meanwhile, the think tank said that earlier plans of presumptive President Rodrigo Duterte to dramatically raise the salaries of policemen and military personnel might also boost spending.
“If he is able to swing this soon, then the government spending would experience a sudden jump upon implementation, and result in higher budget deficits,” the report said.
“The deficits may not bulge if there is underspending or if it means cuts in other ‘fat’ parts of the national government’s budgets,” it added.