Not just yet

Ahead of the official gross domestic product (GDP) report this week, Moody’s Analytics estimated the economy may have grown by 6.8 percent in the second quarter, putting the government’s full-year projection of 7 percent within reach.

Socioeconomic Planning Secretary Ernesto M. Pernia also gave his own thoughts on the matter, saying the country’s GDP may have “likely accelerated to 6.8 percent in the second quarter, compared with 6.4 percent in the opening three months of the year.” He noted, however, it would be “slower than that of April-June 2016 [which was at 7 percent].”

Pernia said the booster “will come from exports,” which have been “expanding rapidly in recent months largely because of stronger shipments of electronics.”

The government said merchandise exports grew for the seventh straight month in June. First half sales grew to $31.04 billion, up 13.6 percent from last year’s $27.33 billion. This was also more than double the government’s 5-percent growth projection for 2017.

To recall, Moody’s Investors Service, a sister company of Moody’s Analytics, affirmed in late June the country’s “Baa2” credit rating. This is a notch higher than the minimum investment grade assigned on the basis of a debtor’s ability to pay. The upgraded score likewise gave the Philippines an indicative outlook of “stable” or a rating “unlikely to change over the next two years.”

Moody’s Investors Service said this was on the back of the Philippines’ economic and financial stability notwithstanding “weaker worldwide governance indicators as compared to other investment grade countries.”

Moody’s Investors Service further said it expected Philippine GDP “growth to be sustained at above 6 percent per year over the next two years, driven largely by the private sector.”

Last week, Moody’s Analytics’ also made note that “domestic factors have remained conducive to strong growth.” It cited the following: Private consumption will grow rapidly in the foreseeable future, incomes will continue to rise and demographics will remain to be favorable.

It also said investments would also expand rapidly, supported by a mix of private and government projects.

Bottom line spin

Analysts estimate that the increase in the prices of widely used goods and services may hit 3.1 percent in 2017 and 3.4 percent in 2018. The government, however, sees inflation at an average of 3.2 percent in 2017 and in 2018.

Still, the estimates are within the anticipated 2-4 percent target range for the next two years.

While the Bangko Sentral ng Pilipinas (BSP) has kept monetary policy unchanged for the 23rd straight Monetary Board meeting, or since September 2014, it is expected to “hike policy rates by three to four times in 2018.” The US Federal Reserve is likewise expected to raise interest rates three times in the same year.

Currently, interest rate for overnight lending is at 3.5 percent, 3 percent for overnight reverse repurchase and 2.5 percent for overnight deposit.

The policy changes would have some negative impact on the economy’s development. These could drive down the country’s growth prospects down to 6.5 percent for 2017 and 6.6 percent for 2018.

Asia, meanwhile, is expected to grow by 6.1 percent before slowing to 6 percent in 2018. Global economic expansion is likewise projected to grow at 3.1 percent and 3.3 percent, respectively, in those two years.

With all the economic and geopolitical threats that have yet to crop up, the government’s higher initial targets could still be compromised.