If the third quarter brought a better-than-expected growth, local think tank Capital Markets Development Initiative (CMDI) expects the economy to perform even better in the fourth quarter.
In a phone interview with the BusinessMirror, University of the Asia and the Pacific and CMDI Senior Economist Victor Abola said the think tank expects the economy to expand by around 6.9 percent to 7 percent in the last three months of the year.
Abola said this estimate could be revised upward, depending on their projections on household consumption and export earnings. “We may be upgrading it slightly, especially if you factor in stronger exports, as well as consumer spending, which we believe is understated because of the way it is estimated.” Abola said household spending is the most difficult to estimate, since it involves a lot of product/industry codes.
Some of these codes, he added, are also not updated to include other products that are currently available in the market. This may include popular imported goods.
Abola added that apart from these, the think tank also expects construction growth to continue its upward trajectory, especially in the last quarter of the year.
“With second-quarter GDP growth revised upward to 6.7 percent, year-to-date GDP tracked also at 6.7 percent. Thus, we think that Philippine expansion should easily hit our fiscal year 2017 projection of 6.5 percent to 7 percent, given also our view that investment spending and national government disbursements on infrastructure will further accelerate in the last quarter of the year,” the think tank said in its latest Market Call report.
Factors that will likely push up the country’s GDP in the last quarter of the year include the expected double-digit increase in the peso value of overseas Filipino worker remittances. The CMDI said remittances in US dollars, which climbed by 9.4 percent in August and 17.4 percent in peso terms, provide much spending power to consumers. The think tank added the 3-percent growth in the United States economy and better growth outlooks for Japan and China will boost demand for the country’s exports and see a significant increase in export earnings in the October-to-December period.
However, what could temper growth in the last quarter of the year is the higher inflation, which is expected to average 3.2 percent this month and in December.
“The mini-fly in the ointment was inflation, which has moved up at a faster pace of 3.5 percent in October, but well within the 2-percent to 4-percent target of the BSP [Bangko Sentral ng Pilipinas]. We think this has peaked and so do not expect an upward adjustment of BSP policy rate in 2017, even if [very likely] the Fed hikes its policy rate by another 25 bps [basis points] in December,” CMDI said.
Earlier this month, the Philippine Statistics Authority reported that the country’s GDP grew by 6.9 percent in the third quarter of 2017 on the back of strong manufacturing, trade and real estate, renting and business activities growth.
Among the major economic sectors, Industry recorded the fastest growth at 7.5 percent, followed by Services at 7.1 percent. Meanwhile, Agriculture slowed down by 2.5 percent, from 3-percent growth in the previous year.