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Faster spending, consumption to boost economic growth

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FASTER state spending, slower inflation and robust overseas remittances are seen to boost economic growth this semester, according to the latest joint assessment by the First Metro Investment Corp. (FMIC) and the University of Asia and the Pacific (UA&P).

In their Market Call report published Friday, FMIC and UA&P said they expect manufacturing sector to improve in the coming months and spending on infrastructure and construction to “strongly bounce back” this semester.

“We believe that PH growth will improve significantly in the last two quarters of the year as we expect National Government (NG) spending to ramp up in H2-2019. Softer inflation and higher peso equivalent of the remittances should also drive further economic activity,” the report stated.

“We see huge spending on infrastructures and capital outlays during the 3rd and 4th quarters of 2019 (i.e., DPWH projects). Besides, NG still enjoys more than enough fiscal space remaining until the end of the year,” it added.

Overall, they said gross domestic product (GDP) growth might settle in the lower part of their 6-6.5% forecast range for the year.

Top government officials on Tuesday said they are seeing a pick up in August expenditures and positive growth for the rest of the year following big disbursements in July and the usual behavior of spending to “grow very fast” in the last quarter.




Latest available data showed government spending in July picked up by 3.43% to P339.4 billion from a year ago but the cumulative spending in the first seven months was still down by 0.11% at P1.93 trillion in the same comparative periods.

Economic managers and economists have blamed the first half’s slower-than-expected 5.5% GDP growth to the four-month 2019 budget delay and the National election ban in May which left projects unfunded, especially infrastructure ones.

FMIC and UA&P said consumer spending will likewise increase for the rest of the year following easing inflation and higher overseas remittances.

Meanwhile, the analysts expect August headline inflation to settle below the 2% mark due to “slower upticks” in goods, lower oil prices and electricity rates on a downward trend and even less than 1.5% by October.

Headline inflation eased to a 31-month low of 2.4% in July, also slower than the 2.7% in June. In the first seven months, inflation averaged 3.3%, past the midpoint of the central bank’s 2-4% target range and still above the downward-revised 2.6% full-year forecast.

The Bangko Sentral ng Pilipinas (BSP) is also expected to further slash its policy rate by 25 basis points (bp) and banks’ reserve requirement ratio (RRR) by 200 bps following dovish remarks from the central bank chief, they added.

Last Tuesday, BSP Governor Benjamin E. Diokno said the market can expect another 25-bp cut in benchmark rates within the year and a possible RRR cut before the Monetary Board’s Sept. 26 policy meeting. — Beatrice M. Laforga

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