The Philippine economy is poised to rebound strongly in the second quarter from a sluggish 5.6-percent expansion in the first quarter, private economists said Thursday.
Economists from First Metro Investment Corp. and University of Asia & the Pacific said in a joint report that robust investments, consumer spending after the mid-term elections and benign inflation would support stronger expansion in the second quarter.
They said that while the first-quarter gross domestic product growth might be slightly off target, a strong growth was expected by the second quarter before and immediately after the May elections, putting the economy back on a fast growth path in the second half. The economy grew 6.2 percent in 2018.
“Investment spending should continue to lead GDP growth, as durable equipment investments have kept a steady growth pace [even prior to the BSP moves], which we expect to accelerate starting the second quarter not only with election spending but also with a higher bounce in infrastructure and other government spending,” the economists said in the report.
The Bangko Sentral ng Pilipinas cut the reserve requirements of universal and commercial banks by a total of 2 percentage points, unleashing about P190 billion in additional peso liquidity into the financial system.
It complemented the reduction in reserve requirements for universal and commercial banks with a phased 200-basis-point reduction in the reserve requirements for thrift banks and non-bank financial institutions with quasi-banking functions and a 100-basis-point reduction for demand deposits and accounts of rural and cooperative banks effective May 31, 2019.
Prior to the RRR cuts, the Monetary Board of the BSP cut the policy rates by 25 basis points to 4.5 percent, the first time in more than six years.
The Monetary Board said it considered the declining inflation rate in its decisions. Latest data from the Philippine Statistics Authority showed that inflation in the first five months settled at 3.5 percent, within the target range of 2 percent to 4 percent for the year.
“We think that inflation will go below 3 percent as early as July and to below 2 percent, due to base effects, by September, which boost consumer sentiment and pockets,” the economists said.
They said money growth should rally starting May after the BSP cut RRR and policy rates and add to its GIR holdings to insulate the economy better from possible external shocks.
“Exports growth should move into the positive territory by the second quarter amidst the US economy’s upward march rolling on,” they said.
The 5.6-percent expansion of GDP in the first quarter was a four-year low, pulled down mainly by the budget impasse that heavily impacted government spending on infrastructure projects.
Global debt watcher Moody’s Investor Service reduced its growth forecast for the Philippines this year to 6 percent from its previous estimate of 6.2 percent, taking into account the lackluster economic growth in the first quarter and the delayed approval of the national budget for 2019.
The World Bank, however, retained its 2019 growth forecast for the Philippines at 6.4 percent.