FOURTH QUARTER gross domestic product (GDP) likely ended on a “stronger” note with positive employment and lower poverty data boosting investment during the period, the University of Asia and the Pacific (UA&P) and the First Metro Investment Corp. (FMIC) said.
The projection was made ahead of the official release of fourth quarter GDP data this month.
“Recent economic indicators point to a stronger Q4 and 2020, with positive employment print and poverty data indicating better investment numbers for the last quarter of 2019. Household consumption will still benefit from this, softer inflation (on average) and low interest rate,” UA&P and FMIC said in their December issue of The Market Call, released Wednesday.
Economists also said investment spending in the last quarter will further accelerate on the back of a strong rebound in infrastructure and capital outlays in the last two months of 2019.
Citing data from the Philippine Statistics Authority (PSA), the report said the economy added about 1.3 million jobs in 2019 and recorded all-time low rates in both unemployment and underemployment at 4.5% and 13%, respectively.
The poverty rate moved closer to the government’s 14% target by 2022, dropping to 16.6% in 2018 from 23.3% in 2015, for average decline of 2.2 percentage points annually since 2015.
Meanwhile, they said consumer spending was likely to have posted above-average gains during the quarter amid easing inflation, which is estimated to average 1.4% during the last quarter of 2019.
Inflation picked up to 2.5% in December to bring the full-year average to 2.5%, well within the official 2-4% target range.
“The peso may have seen its best months as we expect higher BoT/CAB (balance of trade/current account balance) deficits in Q4 with national government ramping up infrastructure spending and the economic momentum gather(ing) pace,” it said.
UA&P and FMIC maintained a 6-6.5% GDP growth forecast for 2019, similar to the narrowed official target issued by the government.
The economy grew by 5.6%, 5.5% and 6.2% in the first three quarters of 2019, bringing the year-to-date average to 5.8%. It would take a 6.7% growth in the fourth quarter to hit the low end of the official target.
Moving forward, UA&P and FMIC said they expect “a last 25 bps (basis points) cut in policy rate by the Monetary Board (MB) in Q1-2020.”
Bangko Sentral ng Pilipinas Governor Benjamin E. Diokno told reporters Tuesday that monetary authorities may deliver another 25-bp cut to benchmark policy rates.
The Monetary Board is due to meet on Feb. 6 and on March 19 during the first quarter.
If rates are cut as advertised, they will follow 75 bps worth of rate cuts in 2019, partially reversing the 175-bps of rate hikes in 2018, when inflation rose to multi-year highs. — Beatrice M. Laforga
