MANILA – First Metro Investment Corporation (FMIC) forecasts better year-on-year output for the Philippine economy in the first quarter of 2019, which would allow it to post a full year growth of between 6.8 to 7.2 percent.
In its joint publication with the University of Asia and the Pacific (UA&P), “Market Call,” the investment house said a sustained deceleration of inflation rate would boost domestic consumption while increase in government spending amid the delay in the approval of the national budget is a plus.
In the first quarter of this year, inflation averaged at 3.8 percent while the March figure is at 3.3 percent, back within the government’s two to four percent target band until 2022.
It peaked at 6.7 percent in September and October last year due to supply-side factors such as lack of supply of rice and several other agricultural products and the elevated price of oil in the international market.
On the other hand, the national budget for this year was signed into law only last April after a delay caused by lawmakers’ questions on allocation for some infrastructure projects.
President Rodrigo Duterte signed the P3.7-trillion national budget but vetoed about P75 billion worth of projects included by lawmakers on the version approved by the Bicameral Conference Committee last February.
In the first quarter this year, government spending grew by one percent year-on-year to P778 billion, hampered by the re-enacted budget.
Economic managers, on the other hand, assured the public of faster implementation of the programmed spending for the year, now that the national budget is in effect.
Meanwhile, the report also noted the drop in unemployment rate to 5.2 percent last January and the still robust growth of remittances from Filipinos working abroad.
“Economic expansion should pick-up in Q1 from its 2018 pace driven by heightened infrastructure and renewed consumer spending,” it said.
It also noted that deceleration of the rate of price increases “augurs well for consumer demand, besides the spill-over effect of election-related spending.”
It also forecasts liquidity infusion in the economy by the Bangko Sentral ng Pilipinas (BSP) in the first half of the year, through cuts in banks’ reserve requirement ratio (RRR) and in policy rates in the second half, because of “slower monetary expansion and inflation falling within its target.”
“These should help boost further growth in the economy via investments and to a lesser extent consumer spending,” it added. (PNA)