MANILA – The Philippine economy is expected to rebound in the second quarter, from a four-year low, due to increased spending and a boost from the midterm elections, according to the latest joint assessment of First Metro Investment Corp. (FMIC) and the University of Asia and the Pacific (UA&P).
“While Q1-2019 GDP growth may be slightly off target, we expect a strong rebound starting Q2 before and immediately after the May elections and head back to its fast growth path in H2,” FMIC and UA&P’s May 2019 Market Call report read.
The country’s gross domestic product grew by 5.6% in the first quarter of 2019, the slowest in four years since growth registered at 5.1% in the first quarter of 2015.
The government blamed the deceleration on weather phenomenon El Niño, as well as the four-month delay of the 2019 budget, and Socioeconomic Planning secretary Ernesto Pernia said the economy should have grown by 6.6% if the budget was passed on time.
The P3.757-trillion national budget was signed into law by President Rodrigo Duterte on April 15, but P95.3-billion worth of programs were vetoed as these items were “not part of the President’s priority projects.”
“The expected ramp-up in infrastructure and other National Government expenditures should facilitate a rebound in Q2,” it said.
With budget approved, FMIC and UA&P said government spending is likely to have picked up in the second quarter and will continue to accelerate throughout the year.
“Investment spending should continue to lead GDP growth, as durable equipment investments have kept a steady growth pace, which we expect to accelerate starting Q2 not only with election spending, but also with a higher bounce in infrastructure and other government spending,” it added.
In January, FMIC and UA&P noted that election spending was likely to drive full-year growth at the 6.8 to 7.2% range this year.
According to FMIC and UA&P, higher investment and consumer spending began in the second quarter with the slowdown in inflation.
“We think that the downtrend in headline inflation and cuts in the BSP policy rates and RRR will encourage higher investment and consumer spending starting Q2,” the report read.
Inflation slowed to a 16-month low in April, but picked up pace in May after six months of deceleration.
“Impact of El Niño on Q2-2019 will likely be less than in Q1. Besides, we are not seeing much growth in Agriculture,” FMIC and UA&P said.
The Philippine agriculture sector grew by 0.67% in the first quarter, slower than the 1.08% in the same quarter in 2018.
Initial estimates of the National Economic and Development Authority (NEDA) showed
El Niño would slash 0.2 percentage points from the full-year growth.
The Philippine Statistics Authority (PSA) is scheduled to release second-quarter economic numbers on August 8. (GMA News)