The Philippines is expected to persist along a growth path in the second quarter this year but at a slower pace of around 5.6 percent after having beaten consensus in the first quarter by growing 6.4 percent instead.
According to First Metro Investment Corp. (FMIC), the investment banking arm of the Metropolitan Bank and Trust Co. (Metrobank), the bulk of the infrastructure projects the government lined up earlier to boost the country’s long-haul prospects are only just beginning to gain footing and has not acquired the momentum required to reap its benefits.
“We expect a slowdown in the second quarter to 5.6 percent,” Vic Abola, senior economist at the University of Asia and the Pacific, said in an online briefing hosted by FMIC.
But he quickly acknowledged that while growth in the April-to-June quarter slowed as projected in terms of the gross domestic product (GDP), output growth in 2024 is forecast to accelerate to 6.5 percent.
According to Abola, the sanguine view he has taken for next year is partly borne by the upside presented by an ongoing government program targeting to diminish the gaping six-million housing backlog by building at least a million of those units this year instead of the historical performance of only up to 300,000 units built in a year.
“This is a huge program addressing the housing backlog given that the construction sector has a 3.2 percent multiplier impact,” Abola said.
He explained output growth or GDP expands by P320 billion more for every P100 billion spent in closing the huge housing gap.
FMIC president Jose Patricio Dumlao is optimistic the economy will expand by 6.1 percent this year on the back of sustained domestic demand that has helped lift the economy quarter after quarter the past two years.
“This positive momentum will be supported by prudent fiscal management, heightened infrastructure spending, and enhanced business and consumer spending,” he said.
Consumer spending grew 6.3 percent in April and May this year, driven by higher by an employment rate higher than 5 percent even as unemployment fell during the period, reinforcing expectations of higher consumer spending, Dumlao noted.
FMIC officials hold the view that the 12.1 percent increase on the Public Works and Highways department ensures the continuation of major infrastructure projects across the country.
Their collective view is that with weaker crude oil and food prices, inflation which stood above 8 percent at the start of the year will decelerate faster down the line and likely average 5.5 percent this year as its falls below 4 percent by the end of the year.
The remittances of overseas Filipinos, which help push consumption spending and which grew 2.8 percent in May this year to $2.49 billion, was seen rising 3 percent up to 5 percent in the months ahead, according to FMIC.
“After reaching its all-time low in September 2022, the peso has maintained a relatively stable level this year. However, the volatility of the peso is expected to continue due to a widening trade deficit, with projections indicating a trading range of P56 to P58 per dollar. Despite this volatility, it still holds positive implications for the economy, benefiting approximately 70 million Filipinos,” FMIC said.
