Downside to sustained Q2 expansion seen

Economic expansion measured as the GDP was seen sustained at a solid pace in the second quarter of maybe 6.4 percent or even better, latest indicators from the central bank showed.

However, the policy-making Monetary Board of the Bangko Sentral ng Pilipinas (BSP) expressed concern over so-called downside risks, particularly the slower-than-expected national government spending in recent months.

In the recently published highlights of the latest monetary policy-setting meeting, the highest policy-making body of the Central Bank cited strong indications of continued growth in the second quarter of the year.

“Using leading and forward-looking indicators, both composite leading index and nowcast models suggest a steady GDP growth momentum in the second quarter of 2017,” the Central Bank said. Nowcast pertains to the official but delayed estimate of the anticipated growth for the period.

The local economy grew slower in the first quarter at only 6.4 percent, from 6.6 percent a quarter earlier and from 6.8 percent in the first quarter last year.

Nevertheless, the Philippine growth performance was one of the fastest in the region.

“Trends in other high-frequency demand indicators are also generally positive, with continued increases in sales volume of automobiles—at 20-percent year-on-year growth in the first quarter of 2017—while more than half of the 20 major industries in the manufacturing sector continue to operate above the 80-percent capacity level,” the Central Bank said.

The BSP also noted business and consumer optimism remained positive at the quarterly surveys on the sentiment of the economic sector, with consumer confidence hitting an all-time high in the second quarter.

However, the BSP said some indicators suggest particular downside risks to economic growth this year.

Among the downside risks to domestic demand was the slow pace noted on the disbursement of national government funds. The Philippine composite purchasing managers index also posted the lowest reading since data was made available in October 2010.

The BSP, likewise, said the services sector—which accounts for more than half of the country’s total employment—recorded a net employment loss of 557,000 workers, according to the April 2017 Labor Force Survey.

The Philippine Statistics Authority is expected to report the country’s second-quarter GDP numbers in mid-August.

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Bianca Cuaresma graduated cum laude from the University of Santo Tomas (UST) with a degree in AB Journalism. She was with the BusinessMirror during her internship in 2012 where she was assigned at the Department of Foreign Affairs (DFA) beat. She continued to be of service to the paper after she graduated in 2013. In 2014, she was awarded as the Reporter of the Year by the paper for her coverage in the Bangko Sentral ng Pilipinas (BSP). She is a BusinessMirror reporter for 3 years now, and has covered general assignments and agencies related to banking and finance in the country.