Q2 growth seen to hit 6%

Credit to Author: MAYVELIN U. CARABALLO, TMT| Date: Mon, 01 Jul 2019 16:30:59 +0000

A Bangko Sentral ng Pilipinas (BSP) official said on Monday monetary authorities forecast Philippine economic growth to hit 6 percent in the second quarter, a projection shared by the First Metro Investment Corp. (FMIC) and the University of Asia and the Pacific (UA&P).

On the sidelines of the Pre-State of the Nation Address (SONA) Economic and Infrastructure Forum at the Philippine International Convention Center in Pasay City, BSP Deputy Governor Diwa Guinigundo — who was to retire on Tuesday — said the central bank was “looking at about 6-percent (growth)” for April-to-June.

The figure is higher than the 5.6-percent gross domestic product (GDP) growth posted in the first quarter, and matches that recorded in the same period last year.

BSP Deputy Governor Diwa Guinigundo

Government spending boosted economic expansion, according to Guinigundo, adding that lower inflation played a big part.

“With lower inflation, consumption expenditure will be stronger. With low inflation and low interest rates, private investments will also be important drivers of economic growth,” he said.

After the country registered slower-than-expected economic growth in January-to-March — mainly blamed on the four-and-a-half-month delay in the approval of the 2019 national budget — the central bank’s policymaking Monetary Board cut on May 9 its overnight borrowing, lending and deposit rates by 25 basis points to 4.50 percent, 5 percent and 4 percent, respectively, following a series of rate hikes last year.

It maintained those rates on June 20 after deciding to take a “prudent pause.”

Also on Monday, FMIC and UA&P said in a joint report they also saw the country’s GDP accelerating to 6 percent in the second quarter “despite fairly weak numbers in April, as we see major public-private partnership projects and infrastructure spending bump up starting [in] May, while inflation slowing back to below 3 percent in June and still lower thereafter should provide the impetus to robust consumer spending.”

Earlier this month, the government reported that inflation rose to 3.2 percent in May from 3.0 percent in April.

“While May inflation may have blipped to 3.2 percent from 3 percent [the month before], and NG (national government) infrastructure spending fell in April, these should prove temporary and the economy would rebound starting Q2,” the report said.

Lower crude oil prices would help inflation ease further, it added.

For his part, Socioeconomic Planning Secretary Ernesto Pernia said on the sidelines of the pre-SONA forum that June inflation might settle at 2.8 percent.

Last Friday, the BSP said inflation last month was likely to settle between 2.2 and 3 percent. Monetary authories earlier slashed their 2019 inflation forecast to 2.7 percent from 2.9 percent, and their 2020 projection to 3 percent from 3.1 percent.

‘A’ rating foreseen

Meanwhile, Guinigundo expressed confidence that the Philippines would secure an “A” credit rating from Japan Credit Rating Agency Ltd. (JCRA) in the next 18 months.

“With respect to JCRA, they have already given us ‘BBB+’ with a positive outlook. So [from] the perspective of the JCRA, within the next 18 months there could be an upgrade,” he said.

In April, the Japan-based debt watcher revised its investment grade credit rating outlook for the Philippines to “positive,” which means the country is now a step away from bagging a single-A rating.

The Philippines’ BBB+ ratings, it said, mainly reflect the country’s high and sustainable economic growth performance.

With ANNA LEAH E. GONZALES

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