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7% GDP growth in Q1 likely

By: - Reporter / @bendeveraINQ
/ 05:05 AM May 07, 2018

Economic growth in the first quarter could have hit 7 percent, or the lower end of the government’s target range for the year, amid strong spending on public goods and services even as high inflation tempered private expenditures.

The government will release the first-quarter gross domestic product (GDP) performance report on Thursday, with expectations of faster growth than a year ago’s 6.4 percent and a quarter ago’s adjusted 6.5 percent.


Two economists polled by the Inquirer last week projected a 7-percent GDP expansion during the first three months, with IHS Markit Asia-Pacific chief economist Rajiv Biswas citing “a strong upturn in government infrastructure spending and robust consumer demand.” Infrastructure spending rose 33.7 percent in the first quarter.

“This shows that the Duterte administration is delivering on its medium-term plan to ramp up infrastructure spending, with near-term priority being given to public works, police and education infrastructure,” Biswas said.


For University of Asia and the Pacific economics professor Victor A. Abola, whose forecast was also 7-percent for the first quarter, the full-year target of 7-8 percent GDP expansion was “achievable for as long as the public-private partnership and infrastructure projects really take off” even as “the risk has recently shifted to the downside.”

Standard Chartered Bank, ING Bank Manila senior economist Joey Cuyegkeng and Land Bank of the Philippines market economist Guian Angelo S. Dumalagan see the figure hitting 6.9 percent.

“Very strong government stimulus would more than offset the possible slowdown in household spending resulting from higher inflation. Business spending could have recovered in the first quarter based on stronger capital equipment imports,” Cuyegkeng said.

Inflation averaged 3.8 percent in the first quarter, near the upper end of the 2-4 percent target range for 2018, mainly due to the Tax Reform for Acceleration and Inclusion (TRAIN) Act.

Signed by President Duterte in December, Republic Act No. 10963 or the TRAIN law increased or introduced new excise taxes on cigarettes, sugary drinks, oil products and vehicles, among other goods, to compensate for the restructured personal income tax regime that raised the tax-exempt cap to an annual salary of P250,000.

“Consumer spending likely picked up, as the reduction in personal income taxes increased households’ disposable income, allowing consumers to spend more despite higher inflation. The robust growth in overseas Filipino workers’ remittances, whose purchasing power has been amplified by a weaker peso, also helped consumers hurdle the sharper rise in consumer prices. Government spending likewise gained momentum,” Dumalagan said.

The research arm of debt watcher Moody’s expects the economy to have grown 6.8 percent in the first three months. Oxford Economics lead Asia economist Sian Fenner and London-based Capital Economics pegged their forecast at 6.7 percent.


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TAGS: Business, economic growth, gross domestic product (GDP)
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