The economy is expected to accelerate to 6.5 percent or higher in the fourth quarter of the year as consumer, government and investment spending get into higher gear moving forward.
This according to the latest issue of the Market Call, a monthly publication released by First Metro Investment Corp. and University of Asia and the Pacific Capital Markets Research.
“We see an acceleration of GDP (gross domestic product) growth to at least 6.5 percent in Q4, driven by sustained speedier gains in infrastructure and private construction spending and robust national government and consumer spending,” the latest report, released yesterday, said.
“Private investments count on big ticket Public-Private Partnership projects and strong demand in both residential and commercial construction, all of which find support in more upbeat business confidence towards Q4 (borne out by the latest Bangko Sentral ng Pilipinas or BSP survey). The national government’s ability to speed up spending resurfaced in Q3, especially in September which saw it soar by 39 percent,” it added.
The research paper said low inflation, huge job gains and low interest rates will drive more robust consumer spending.
It also expects average inflation rate for the fourth quarter to fall to 1.5 percent from 1.7 percent in the third quarter.
“Crude oil prices pose no real threat while rice inventories have hit highs in August and the harvest season has set in,” the publication said.
“We should also see faster money growth, although we don’t expect a sharp rise despite the policy rate and RRR cuts. Lending to the consumer sector has dominated banking activity, but that has its limits, having achieved high-20 percent growth,” it added.
According to the report, exports will likely remain flat, especially with the BSP allowing stronger peso recently, but overseas Filipino worker (OFW) remittances should gain pace since “US dollar remittances tend to rise when the peso strengthens as recipient families’ peso needs remain constant.”
“Despite the peso going on an appreciation trend since late September, the rise in trade deficit in that month suggests that faster GDP growth, especially investment spending, will push the deficit up significantly, and will likely offset OFW remittances,” the publication said.
“This, together with lower interest rates due to the policy and RRR cuts, would bring the peso back to a depreciation mode,” it added.