Above average growth in 2H unlikely: report

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The above-average growth posted in the first half of 2022 is unlikely to happen again in the second semester of the year, according to a report released yesterday.

“A repeat of the above-average performance of the Philippine economy in (the) first half does not appear likely for second half, in the absence of heavy election spending (as has happened in the past) and the higher base in second half-2021,” the latest issue of the Market Call said.

The first semester growth of 7.8 percent of the Philippine economy is well above the Development Budget Coordination Committee’s full year growth target of 6.5 to 7.5 percent.

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“Overall, we see the economy strong enough after the first half GDP (gross domestic product) expansion of 7.8 percent to weather the global economic sluggishness and an expected second half slowdown after the recent presidential elections,” the report said.

“While we expect a slight slowdown in national government spending, we do not think it will matter much, since the private sector has stepped up with close to one million jobs added in May and June (i.e., post-election period basically). National government still has P1 trillion in unused deficits (from program) for second half while tax revenues will likely continue to outperform,” it added.

The Market Call said inflation will likely average 6 percent in the second semester, “assuming only a minor further slide in crude oil prices and put some brakes on consumer spending.”

“However, the peso depreciation (year-to-date of 8 percent in June) which benefits overseas Filipino worker families, business process outsourcing employees, exporters and their suppliers with an estimated total population of around 700 million should offset the likely weakness in the remaining 33 percent of the population’s spending,” the report said.

The report further said that the services sector will continue its pace of recovery as the previously severely constrained sub-sectors, such as accommodation and food and transport, should hasten their bids to normalize operations. “The external sector will remain challenged since imports may shift from oil to food while exports may respond positively to the peso depreciation only starting the fourth quarter,” the report said. “The peso may have a little respite from its recent weakness as OFW remittances strengthen in the fourth quarter, but the US Fed’s aggressive policy rate hikes (and thus, short-term interest rates) will maintain the pressure,” it also said.– Angela Celis

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