THE resumption of the construction of the government’s big-ticket infrastructure projects will enable the economy to post a growth of 6 percent in the second quarter of the year, according to a local think tank.
In its latest Market Call report, First Metro Investment Corp. and University of Asia and the Pacific (FMIC-UA&P) Capital Markets Research said apart from higher infrastructure spending, the country still enjoys low inflation.
“Although we think the economy will recover in Q2, [because of] the high base a year ago and the weak numbers for April, the pace may hover around 6.0 percent, good enough to revive positive sentiment in all economic players,” FMIC-UA&P said.
The report projected a recovery in the second quarter despite the 5.7-percent decline in infrastructure spending in April to P59.7 billion due to the budget impasse and the election ban.
Inflation, FMIC-UA&P Capital Markets Research noted, increased to 3.2 percent in April. This has brought the year-to-date or January to April 2019 inflation rate to 3.5 percent.
The think tank said inflation will likely return to the 3-percent level by June and will continue to slow in the coming months.
“Even more, the collapse in crude oil prices into bear market territory [low-$50 for West Texas Intermediate] supports a more fundamental easing of the inflation rate for the third quarter,” FMIC-UA&P Capital Markets Research said
Exports rebound
MEANWHILE, the think tank said exports are expected to rebound in the Japanese and Chinese markets in the coming months to counter any threats to the country’s export earnings.
The think tank added that the recovery of the United States economy would help improve the country’s export performance moving forward.
For his part, Socioeconomic Planning Secretary Ernesto M. Pernia told reporters on Monday the recent announcement that the US and China have agreed to resume trade talks will be good for the economy.
Wire reports on Monday said US President Donald Trump and Chinese President Xi Jinping have reached a temporary agreement to resume US-China trade talks at the recent Group of 20 (G-20) meeting in Japan over the weekend.
“At least for the meantime, there’s a lull so that will be better than no lull,” Pernia said at the sidelines of the Pre-State of the Nation Address (Sona) forum in Pasay City on Monday.
Meanwhile, FMIC-UA&P Capital Markets Research said the economy’s growth will also be supported by the growth in imports in capital goods.
In March, the think tank said imports, which grew double-digit in March, is expected to continue for the rest of the year.
It noted that big-ticket PPP projects are “in full steam, while infrastructure expenditures should renew their run after the approval of the NG budget by mid-April,” citing the MRT 7, Cavite-Laguna Expressway, Nlex-Slex Connector, and LRT Train Extension to Bacoor, Cavite” among the big-ticket projects.
Earlier, Pernia said growth in the import of capital goods could indicate that firms are making long-term investments.
Image credits: Nonie Reyes