The Philippine domestic economy can grow at a faster pace in the second semester on the back of accelerating state spending, thereby hitting a full year growth of 5.2 percent, according to a joint research by First Metro Investment Corp. and University of Asia and the Pacific.
“While the first half GDP [gross domestic product] growth figures were clearly disappointing, the overall picture remains positive,” FMIC-UA&P said in its latest monthly macroeconomic review.
The Philippines posted a second-quarter GDP growth of 3.4 percent from a revised 4.6-percent expansion in the first quarter, falling below the market consensus growth of 4.9 percent. Taking out seasonality factors, GDP decelerated to 0.6 percent in the second quarter from 1.9 percent in the first quarter, but the research said these were both better than the upswing of only 0.4 percent in the second half of 2010.
Significantly higher government spending in the second half should bring the economy back to an acceleration mode, enabling a growth of 5.2 percent this year.
“With the recovery in the US sputtering, the euro zone mired in a debt crisis and Japan slowly emerging from the devastating tsunami in March, the Philippines felt the compounded blow just as our other Asian neighbors also suffered a similar plight,” the report said.
The slower growth in the second quarter was also partly due to a large base effect since the GDP gain for the same period last year was a 34-year record high of 8.9 percent, in turn a result of massive election-related government spending, the FMIC-UA&P report said.
But the research said the real bad news was that gross national income (formerly gross national product or GNP) managed only to increase by 1.9 percent as net personal income (formerly net factor income from abroad), which included overseas Filipino workers’ remittances, declined 2.9 percent. This was primarily attributed by the report to the strong peso, which appreciated 4.6 percent from the second quarter of 2010.
“The good news is that base effects will work to the benefit of the economy with government spending easily showing a double-digit growth in the second half as it declined during the corresponding period in 2010,” the report said, adding that the national government was bent on accelerating its spending as the seven-month budget deficit only reached P43.7 billion or 16 percent of the full-year target of P293 billion.
The report also noted that the US and Japan were showing more signs of vitality once again and that the softening in crude oil prices to below $90 a barrel was another positive factor.
Meanwhile, the report hailed the Bureau of Internal Revenue’s continued improvement in tax collections, which grew 15.6 percent in July despite the slower growth in the first semester.