The Philippine economy is expected to grow nearly 7 percent in the second half of the year, on sustained domestic demand and higher government spending on infrastructure, economists from First Metro Investment Corp. and University of Asia & the Pacific said in a joint report Monday.
“Despite much political noise within and outside the Philippines, we don’t see much change in the growth narrative, as the economy continues to emit bright lights. We still see 6.7-percent to 7.1-percent gains in the third quarter and fourth quarter,” the economists said in the Market Call Capital Markets Research for the month of October.
“Domestic demand’s luster should have undiminished shine, as government spending on infrastructure and consumer spending, amidst rapidly rising peso OFW remittances,” it said.
The report said despite a high base in 2016, infrastructure spending had picked up since May and should be hitting a growth pace approaching 20 percent toward the end of the year.
“This, combined with a rebound in private construction, should boost total construction spending which should more than offset some weakness in durable equipment expenditures,” the report said.
The economists said exports, with its double-digit expansion, would also provide the needed boost to achieve the original full-year growth target of 6.5 percent to 7 percent for the year. Exports were
seen to accelerate as the economic expansion in the US, eurozone and China gained traction and exceeded expectations.
The government earlier said the economy was expected to grow between 6.5 percent and 7.5 percent this year, anchored on higher fiscal spending, robust domestic demand and investments. Growth in the first half averaged 6.4 percent.
Economists predicted that growth could be faster in the second half as the government ramped up fiscal expenditures particularly on infrastructure projects under the ambitious P8.4-trillion “Build, Build, Build” program.
The economy grew 6.9 percent in 2016, near the upper bound of the target range of 6 percent to 7 percent.
Finance Secretary Carlos Dominguez III said an average growth rate of 7 percent for the Philippines this year and beyond would be sustainable as macroeconomic fundamentals remained solid and strong.
Dominguez said in a speech during the annual meetings of the World Bank Group and the International Monetary Fund in Washington D.C. that the Philippines emerged as an important engine of growth for the East Asian region.
Dominguez said the increased investments in infrastructure would be pursued without sacrificing the fiscal stability the government worked so hard to achieve. He said the government intended to fund the investments through official development assistance and a substantially broader revenue base.
The International Monetary Fund retained a growth forecast of 6.6 percent for the Philippines this year. In its World Economic Outlook for October 2017, the IMF said the Philippines would continue to outperform other large economies in the Asean region.
“Specifically, economic activity in 2017 is projected to expand by 5.2 percent in Indonesia, 5.4 percent in Malaysia, 6.6 percent in the Philippines, 3.7 percent in Thailand and 6.3 percent in Vietnam,” it said.