The Philippine economy has the potential to grow over 7 percent in the second quarter on higher infrastructure spending, robust manufacturing and sustained consumer spending, economists from the First Metro Investment Corp. and University of Asia & the Pacific said in a joint report Wednesday.
The economists said in the June edition of Market Call Capital Markets Research that the government showed the ability to expand infrastructure spending on a sustained basis.
“And with major PPP projects [considered as private construction] getting up to speed, the construction sector will likely lead investment spending in the second quarter,” the report said.
The government sustained the torrid pace of growth in infrastructure and capital outlay spending, which almost doubled from P33.5 billion in April 2017 to P65.6 billion in April this year. It also marked the fourth consecutive month of above-10-percent gains in 2018. Strong spending in April resulted in a P1-trillion disbursements in the first four months.
The report also cited the unusually rapid growth in manufacturing and tax revenues in April, pointing to brisker economic activity during the quarter.
The country’s manufacturing output, measured by the volume of production index, soared 31.1 percent year-on-year in April, a large jump from the 16.5-percent expansion recorded in March.
“Strong employment gains averaging 1.5 million new jobs for the year ending in the second half, should provide additional impetus to consumer spending apart from the above gains and the likely positive impact of Train’s [Tax Reform for Acceleration and Inclusion law] individual income tax cuts,” the report said.
They said the positive developments would likely offset the sluggish growth in exports in the first quarter and the 9.8-percent slump in remittances from overseas Filipino workers in March.
“Overall, the high-octane driven speed suggested by economic numbers and consumer sentiment should enable the Philippine economy to resume 7 percent and above growth by the second quarter,” they said.
The GDP grew 6.8 percent in the first quarter, faster than 6.5 percent a year ago and 6.6 percent in the fourth quarter of 2017, despite the acceleration in inflation during the period which neared the upper limit of the target range of 2 percent to 4 percent.
The first-quarter GDP was driven primarily by robust performance of the manufacturing, trade and services sectors.
Among the major economic sectors, the industry recorded the fastest growth at 7.9 percent, followed by services with 7 percent. Agriculture grew at a slower pace of 1.5 percent.
Economic Planning Secretary and National Economic and Development Authority director-general Ernesto Pernia said the economy could have expanded faster if inflation was more subdued during the period.
The first-quarter performance made the Philippines one of the best performing economies in the region, next only to Vietnam’s 7.4 percent growth, same as China, and faster than Indonesia’s 5.1 percent.
Finance Secretary Carlos Dominguez III said a more aggressive spending under the ‘Build, Build, Build’ program and other poverty-reduction initiatives would let the Duterte administration hit its target of a GDP expansion of 7 percent or better and reduced poverty-incidence rate of 14 percent over the medium term.