With 7.5 percent growth in the second quarter of the year, the fastest in Southeast Asia, The Philippine economy is again set to grow by more than 7 percent in the third quarter, First Metro Investment Corp. (FMIC) and the University of Asia and the Pacific (UA&P) said.
In it’s September Issue of Market Call, FMIC and UA&P said that amid continued government spending and expansion in tax base, Philippines has remain on track with the country’s outlook of another above seven-percent GDP (gross domestic product) growth for Q3 (third quarter).
“The Q3 was off to a fast start, as the National Government resumed the dizzying pace of infrastructure spending, which rose by 45.1 percent in July. The economy’s health may also be reflected by the 18.5-percent increase in tax revenues for the same month,” FMIC and UA&P continued.
Given the sustained increase in government infrastructure spending and the manageable inflation, economic growth in the second half of the year may again surpass the government’s six- to seven-percent target.
“Continuing low interest environment – especially with the outward movement of SDA (Special Deposit Accounts) funds from the BSP – and better exports prospects provide additional support to this view,” FMIC and UA&P added.
With an average inflation of 2.8 percent as of August, it is expected to remain low throughout the second half of the year.
“Despite high crude oil prices, pushed up primarily by political tensions in the Middle East (Syria and Egypt), mild increases in non-food prices and better harvests starting October should keep inflation very much in check in H2 (second half),” FMIC and UA&P stressed.
Considering all these, an aggressive infrastructure spending is expected from the national government in the second semester due to low deficit and tax revenue gains.
It was also noted that the US economy recovery and China’s avoidance of a ‘hard landing’ should ensure that external demand will not be a big drag on growth in H2 (second half), as it had in H1 (first half).
FMIC and UA&P also added remittances from Filipinos abroad are expected to remain strong in the second half of the year. This, coupled with peso depreciation, would further support domestic consumption in the second half, the Market Call read.
Data for third quarter GDP is set for release in November.