Philippines’ economic growth may be gained in the second quarterTer, in stable inflation and Improve labor market conditions, Asian and Pacific University (UA&P) said.
UA&P said on its latest market call that economic indicators were “slightly positive” and expected GDP to grow by 5.6% in the second quarter of the 5.4% increase in the second quarter.
In the second quarter of 2024, the rate of this year will be slower than 6.5%.
The target range this year is still below the government’s 6-8%.
“From March to May, year-on-year inflation under the floor (2%), accelerated infrastructure spending and higher employment should allow consumers to spend more,” it said.
Inflation was 1.3% at a five-year low in May as utility costs rose at a slower pace. This brings the five-month average to 1.9%, slightly below the target band of Bangladesh 2-4%.
According to the Philippine Statistics Bureau, about 650,000 new jobs were created in April, bringing the number of Filipinos to 48.67 million. However, the unemployment rate in April rose to 4.1% from 3.9% in April 2024.
UA&P noted that despite negative consumer outlook, consumer spending may be strengthened in the second quarter.
The latest BSP Consumer Expectation Survey shows that Filipino consumers became pessimistic in the second quarter but remained optimistic for the next 12 months.
UA&P said ongoing infrastructure projects could accelerate spending in May.
It added: “The appearance shows moderate signs of improvement and should not reduce the expansion of domestic demand.”
Further relaxation
UA&P expects BSP to provide another 25 benchmark points (BP) reduction in the third quarter.
“If crude oil prices prove to be short-lived or moderate, another BSP cut could be made in the third quarter,” it said.
Last week, the Monetary Commission lowered its target reverse buyback rate from 5.5% to 5.25% amid moderate inflation outlook and weaker growth.
UA&P said the U.S. Federal Reserve could delay its own lowered tax rates until later this year.
“We expect peso depreciation to be the policy rate decisions of the BSP and the Federal Reserve, as well as the deteriorating Israel-Iran conflict,” it said.
BSP Governor Eli M. Remolona, Jr. Earlier it was shown that the rate of decline in August was dependent on the data and further escalated in the Middle East conflict.
Meanwhile, Diwa C. Guinigundo, national analyst at Globalsource Partners, said the BSP’s decision “just quite a bit.”
“Its decision to lower policy rates for the second time reflects not only its huge monetary space, but also an assessment of the risk that has not yet been realized,” he said in a report on June 23.
He also noted that the growth in the first quarter was weak and “can be supported by dirty monetary policy.”
He added: “Based on its agile performance in assessment and appropriate action, BSP is expected to lower tax rates in the second half of 2025, which is what the actual data allows.”
Mr Guinigundo also pointed out that the possible impact of oil prices rising triggered by escalating wars in the Middle East is “too real”.
“The other point to consider is that the possible differences between the policy rates of BSP and the Fed’s funding rates may occur. The current dynamics seem to indicate that if the differences fall below one hundred basis points, then some capital outflows will follow and cause a weakening of the peso.” – Aubrey Rose A. Inosante
