FMIC-UA&P report sees 6.5% Q3 GDP growth

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ECONOMIC GROWTH likely at least sustained in the third quarter the pace clocked in the preceding three months, on the back of strong household and government spending plus a boost from rising exports, analysts of First Metro Investment Corp. (FMIC) and the University of Asia and the Pacific (UA&P) said in their latest monthly joint report.

“We see another 6.5% or better expansion in GDP for Q3, as consumer spending should kick up following above 12% peso-remittance gains in the three months ending July and national government spending in its fourth consecutive month of double-digit rise by August,” FMIC and UA&P said in the October issue of The Market Call.

The Philippine Statistics Authority (PSA) is scheduled to report third-quarter GDP data on Nov. 16.

Last semester’s 6.4% gross domestic product (GDP) average growth compares to the government’s 6.5-7.5% target for this year.

The Market Call expects growth to clock 6.7-7.1% this semester which, if realized, would put the government’s target within reach.

Central bank Governor Nestor A. Espenilla, Jr. has said that the government’s growth goal for 2017 was “attainable” given strong macroeconomic fundamentals and upbeat domestic economic activity. The International Monetary Fund and the World Bank both expect full-year growth at 6.6%, while the Asian Development Bank projects 6.5%.

“Better implementation of key infrastructure projects, along with the rebound in exports and manageable inflation, is expected to augur well in driving a vibrant growth in H2 2017,” the economists said, echoing expectations of President Rodrigo R. Duterte’s economic team that more big-ticket projects will be rolled out on the second year of his term.

Bigger government and consumer spending and rising external demand “appear to be in sync” to support above 6.5% GDP growth for the quarter, the analysts said. Public spending in particular is expected to maintain an “elevated pace” over the near term.

The Bureau of the Treasury yesterday reported that overall government spending grew by eight percent to P2.014 trillion in the nine months to September from a year-ago P1.86 trillion, even as it fell six percent short of a P2.138-trillion program for the same period. Sans interest payments, state expenditures grew 10% annually to P1.766 trillion as of September, even as they fell six percent short of a P1.869-trillion program for those nine months.

Outbound shipments of goods grew by 11% and 9.3% in July and August, respectively, picking up from June’s 5.8% but still slower than April’s 19.1% and May’s 14.0%.

Exports are likely to remain supported by improving economic performance of the United States, the euro zone and China, which would mean greater demand for locally made goods, FMIC and UA&P said in their report.

Household spending, which accounts for more than three-fifths of GDP, has been supported by a steady stream of remittances from Filipinos abroad that grew 5.4% from a year ago to hit $18.585 billion as of end-August.

GDP growth is seen intact alongside benign inflation, with the pace of price increases assured to remain within the central bank’s 2-4% target band.

FMIC and UA&P also expect the peso to end the year at P51.48 to a dollar as the greenback is seen to pick up strength.

The US Federal Reserve is widely seen to raise interest rates anew in December, an expectation that has been boosting the dollar. — Melissa Luz T. Lopez