Amid high inflation, Moody’s sees slower PH GDP growth of 6.6% in Q2

This Aug. 13, 2010 photo shows a sign for Moody’s Corp. in New York. AP FILE PHOTO

The research arm of debt watcher Moody’s expects the economy to have had grown by a slower 6.6 percent year-on-year in the second quarter partly due to high inflation.

The forecast of Moody’s Analytics was lower than the 6.8-percent gross domestic product (GDP) growth during the first quarter as well as the revised 6.7-percent expansion in the second quarter of last year.

Its projection was also below the government’s full-year growth target of 7-8 percent for 2018.

The government will announce the second-quarter economic performance on August 9.

“Consumer spending is healthy, thanks to steady inflows of overseas worker remittances and a firm labor market. Investment has been robust and is likely to remain strong, as the government boosts infrastructure development. External demand has remained solid,” Moody’s Analytics said.

However, Moody’s Analytics warned that the “rising price pressures will need watching.”

“Headline inflation is at a five-year high and is well above the Bangko Sentral ng Pilipinas’ target band of 2-4 percent, which has prompted two policy rate hikes this year,” Moody’s Analytics noted.

Headline inflation averaged 4.3 percent in the first half.

In the second quarter alone, the average rate of increase in prices of basic goods and services was 4.8 percent, faster than the first-quarter average of 3.8 percent.

Last May, Socioeconomic Planning Secretary Ernesto M. Pernia disclosed that the first-quarter GDP could have expanded by almost 7.5 percent had not for the higher-than-expected rise in consumer prices.

Pernia, who heads the state-planning agency National Economic and Development Authority (Neda), had said that inflation was the “spoiler.”

The Neda chief told the Inquirer last month that the government was working to temper inflation while at the same time keeping the growth momentum.

“Sustaining high economic growth is needed to expand supply, that tempers inflation in the medium to long term,” Pernia had explained.

While continuously expanding the economy, Pernia was also optimistic that inflation “will be tempered in the short term, with normalizing peso, oil, rice and fish prices.”

Last month, economic managers jacked up their inflation forecast for 2018 to 4-4.5 percent from 2-4 percent previously.   /kga