THE Philippine economy likely grew above 6 percent in the second quarter of the year, an international research firm said, but price movements will “need watching.”
In its most recent economic preview for the Asia Pacific, Moody’s Analytics—the research arm of Moody’s Corp.—said gross domestic product (GDP) growth in the country likely “softened a little” from April to June this year, but the think tank remained optimistic of growth drivers in the country.
In particular, Moody’s Analytics forecasted a 6.6-percent growth number for the country in the second quarter of the year, from the actual 6.9-percent growth in the first three months of 2018.
“The Philippine economy likely grew 6.6 percent year-on-year in the June quarter, after a 6.9-percent lift in the first three months of the year. Consumer spending is healthy, thanks to steady inflows of overseas worker remittances and a firm labor market,” Moody’s Analytics said.
“Investment has been robust and is likely to remain strong, as the government boosts infrastructure development. External demand has remained solid,” it added.
The Philippine Statistics Authority is expected to release the country’s second-quarter growth number
on Thursday.
Warning on inflation
Despite the optimism on growth drivers, Moody’s Analytics gave a warning on the rising inflation numbers of the country.
“Although these factors likely supported 6.6-percent GDP growth in the second quarter, rising price pressures will need watching. Headline inflation is at a five-year high and is well above Bangko Sentral ng Pilipinas’s (BSP) target band of 2 percent to 4 percent, which has prompted two policy rate hikes this year,” the research firm said.
Coincidentally, the BSP is also scheduled to have its fifth monetary policy-setting meeting on Thursday.
The country’s latest inflation average is at 4.3 percent in the first six months of the year—where June registered the highest monthly print at 5.2 percent. Just last week, the BSP said inflation will likely fall within 5.1 to 5.8 percent in July this year.
Should inflation in July hit the lower end of the BSP’s forecast for the month, the average price growth for the first seven months of the year will hit 4.4 percent.
On the other hand, if inflation hits the upper end of the BSP’s forecast, price growth will hit an average of 4.5 percent for the January-to-July period. Both scenarios are still a breach of the BSP’s 2 percent-to-4 percent average target range of the BSP for the year and for 2019.
In their June policy meeting, BSP officials agreed to adjust their average inflation forecast for the year from 4.6 percent down to 4.5 percent, taking into account the lower-than-expected inflation outturn in May.
The BSP Monetary Board will reassess this in their upcoming meeting on August 9.