Infra spending pickup points to GDP growth of 6.6% in Q2

Posted on July 26, 2017

THE expansion of government spending on infrastructure will support estimates of Gross Domestic Product (GDP) growing by as much as 6.6% in the second quarter from 6.4% three months earlier, Nomura Global Markets said.

In a report, the Japanese firm noted the widening of the fiscal deficit to 2.6% of GDP at end-June from 2.2% at end-March, leading it to affirm its 2017 GDP growth forecast of 6.7%.

Earlier in the week the Treasury Bureau said government expenditure rose 22.6% from a year earlier at end-June, up from 20.4% in 21.1% a month earlier.

“More progress on infrastructure spending... should in turn boost potential growth,” Nomura said.

“This increasing fiscal impulse will support an already strong growth outlook and justify less monetary accommodation,” it added. “However, in terms of timing, we continue to expect Bangko Sentral ng Pilipinas to raise its policy rate by a cumulative 50 (basis points) in H2 (second half) 2018, by which time we forecast headline inflation to overshoot the central bank’s 2-4% target range.”