Filipino’s holiday spending will likely boost the economy’s growth to above 6 percent in the second half and the whole year, according to a local think tank.
In its latest Market Call report, First Metro Investment Corp. and University of Asia and the Pacific (FMIC and UA&P) Capital Markets Research said full-year growth may average 6.1 percent.
This will be boosted by a projected 6.2-percent growth in the third quarter, and 6.8-percent growth in the fourth quarter of the year.
“Despite weak export demand in the third quarter, we remain optimistic that domestic demand will overcome this, not only in the said quarter but in the fourth quarter, as well. However, the relatively tight monetary policy maintained by the Bangko Sentral ng Pilipinas [BSP] provides a possible downside risk to this view,” the think tank said.
FMIC and UA&P Capital Markets Research said retail firms have indicated that there has been an increase in sales starting in September this year.
It added that, while the country’s manufacturing output posted consecutive declines between May and July this year, there has already been some recovery.
Philippine Statistics Authority (PSA) data showed that manufacturing output grew 1.9 percent in August and 3.5 percent in September.
The group also said that the recovery of the US economy bodes well for the country’s electronics exports, particularly in the fourth quarter.
“The recovery is under way, considering that in September, election spending had barely started. Retail firms have indicated to us strong sales in September and October,” the think tank added.
“The external sector will not pull down the economy, but rather provide a minor upward bump,” it added.
Further, FMIC and UA&P Capital Markets Research said spending in the fourth quarter will increase due to higher overseas Filipino workers (OFWs) remittances.
This, despite the slowdown in OFW deployment in the July-to-August period, affected the amount of remittances sent to the Philippines.
The strengthening of the US dollar caused the dollar value of OFW remittances to decline, but the 5.4-percent depreciation of the peso enabled the peso value of remittances to increase 4.8 percent to P94.3 billion.
“We believe this inflow will increase in the last quarter of the year, amid the seasonal bulge of remittances from the OFWs to their families,” the group said.
The think tank also believes government spending will continue to increase starting the third quarter. FMIC and UA&P Capital Markets Research estimates infrastructure and capital outlays posted a 56-percent growth in the third quarter.
While government spending is expected to slow down in the fourth quarter, government spending will still exceed 30 percent in the October-to-December period.
The group said the September year to date deficit of the national government reached P26.6 billion, leaving it a deficit space of more than P250 billion for the last quarter of the year.
Low government spending has been the perennial cause of slow economic growth under the Aquino administration. Slow government spending caused first-semester growth to reach only 5.4 percent this year.
The PSA reported on Wednesday that the 2015 second-quarter GDP growth was revised upward from 5.6 percent to 5.8 percent.
The top 3 contributors to the upward revision were other services; trade and repair of motor vehicles, motorcycles, personal and household goods; and construction.
Further, net primary income from the rest of the world for the second quarter was revised upward from 2.2 percent to 3.6 percent. This contributed 0.22 percentage point to the upward revision of gross national income from 5 percent to 5.4 percent.
“The PSA revises the GDP estimates based on a revision policy approved by the former NSCB [National Statistical Coordination Board] Executive Board, which is consistent with international standard practices on national accounts revisions,” the PSA said.