Amid weak exports, strong domestic spending will continue to boost the Philippine economy in the second semester, according to a local think tank.
In its latest Market Call report, the First Metro Investment Corp. (FMIC) and University of Asia and the Pacific (UA&P) Capital Markets Research said growth could reach anywhere between 6.5 percent and 7 percent.
This, despite weak global demand, which has caused the dismal showing of the country’s export performance throughout the year.
“Underpinned by strong domestic demand, we believe that the economy will continue its positive run for the rest of 2016 despite the global slowdown. The positive reaction of the private sector to the action-oriented President [Duterte] will, moreover, support the robust growth of the economy,” the FMIC-UA&P Capital Market Research said.
The local think tank said that, while exports are expected to recover in the second semester, this recovery will be slow because of the easing of monetary policy of the United States and China during the last six months of the year.
The country’s export performance has been in the doldrums since 2015. In July exports contracted 8.3 percent in the January-to-July period.
“If we don’t see a move to positive territory of exports growth in the third quarter, we would likely end the year flat. A record balance of trade deficit looms for the year,” the FMIC-UA&P Capital Market Research said.
The growth of the economy will be driven by strong household spending that is common in the last quarter of the year due to the holidays and relatively low inflation.
The FMIC-UA&P Capital Market Research said, however, the current administration’s focus on avoiding underspending is one of the major factors that can boost economic growth in the second half of the year.
Excluding interest payments, the Market Call report stated the government still managed to boost its spending by 14.8 percent in July 2016.
“We don’t expect any surprises from weak crude-oil prices and, so far, La Niña’s fury on the agricultural production has been benign,” the report added.
Earlier, National Economic and Development Authority (Neda) Director General and Socioeconomic Planning Secretary Ernesto M. Pernia said posting an average growth of above 7 percent in the second semester will enable the country to hit the high-end of its growth targets for 2016.
The Development and Budget Coordination Committee (DBCC) has set a full-year growth target of 6 percent to 7 percent this year. This target, Pernia said, is attainable, given the economy’s strong performance in the first two quarters of the year.
Pernia added that with the first-semester GDP growth reaching 6.9 percent, the economy only needs to grow by at least 5.1 percent in the second half of the year to attain at least the low end of the growth target.
In the April-to-June 2016 period, the economy expanded to 7 percent, the highest growth recorded since the second quarter of 2013, when GDP grew 7.9 percent.
With Mia Rosienna Mallari