ECONOMISTS expect gross domestic product (GDP) to grow by at least 6.5% in the fourth quarter, driven by increased public spending as well as robust consumption, according to the Market Call issued by the University of Asia and the Pacific (UA&P) and the First Metro Investment Corp. (FMIC).
“The Philippine economy has returned to the fast lane with the 6.2% GDP growth in Q3, and we expect this to accelerate to 6.5% and above by Q4, as consumer, government and investment spending get into higher gear moving forward,” UA&P and FMIC said in the November issue of Market Call.
They said they expect the government to sustain its increased spending performance from the third quarter, especially on infrastructure where outlays surged 53.9% in September.
However, preliminary data indicate that infrastructure spending in October contracted 12.92% year-on-year to P82.2 billion, bringing the year-to-date total to P628.5 billion.
“Private investments count on big ticket Public-Private Partnership (PPP) projects and strong demand in both residential and commercial construction, all of which find support in more upbeat business confidence towards Q4 (borne out by latest BSP survey),” the report added.
Supported by tame inflation which it projects at 1.5% in fourth quarter, more jobs created and robust remittances to boost consumer spending, UA&P and FMIC maintained their 6% full-year GDP growth projection.
Meanwhile, they noted that capital formation will pick up in the last three months of the year “as capital goods imports move up in tandem with the public and private construction binge and business confidence.”
Capital formation growth contracted by 2.1% in the third quarter which was nevertheless an improvement from the 8.5% drop in the second quarter.
Despite the catch-up plan on spending, the economists said the government will likely miss its full-year budget deficit target worth around P600 billion.
In the 10 months to October, the government posted a budget deficit of P348.3 billion which was smaller than the P438.1-billion deficit a year earlier. Deficits are considered an indication of how effectively the government is pushing funds out the door during the current infrastructure-heavy spending program.
The full-year fiscal deficit target is P624.4 billion, equivalent to 3.2% of GDP.
“We should also see faster money growth, although we don’t expect a sharp rise despite the policy rate and RRR cuts,” the economists said. — Beatrice M. Laforga