The Philippine economy likely expanded by nearly 6 percent in the second quarter, and should grow at even faster pace of 6.5 percent in the second half as the United States and Japan get back on track, according to a joint research by First Metro Investment Corp. and the University of Asia and the Pacific.
“We have become more bullish on the economy for the coming quarters, as both new economic indicators and business sentiment have turned positive,” said the FMIC-UA&P research issued Thursday.
The study said that Philippine exports expanded at a double-digit pace in the second quarter given the strength in East Asia and the Association of Southeast Asian nations.
Export earnings are expected to further accelerate this second half as the economies in the region expand at a faster pace due to heightened domestic spending.
It added that US and Japan’s healthy growth should also boost demand for Philippine products.
The research also expected remittances, a key driver of the domestic economy, to have grown by over 5 percent in the second quarter. Money sent home by Filipinos living and working overseas is in turn seen providing an additional boost to the economy, especially if the peso depreciates slightly or remains stable against the US dollar.
“The peso-dollar rate is likely to remain volatile in second half as a credible and lasting solution to the Greek debt problems is not expected to emerge; it will have a slight appreciation bias by the fourth quarter as more foreign investments get attracted to the robustness of the economy,” FMIC-UA&P said.
The research also sees stable inflation for the year, even as the central bank’s 5-percent inflation ceiling may be breached this second semester.
Given the inflation outlook, the research said the Bangko Sentral ng Pilipinas may hike rates by another 50 basis points.
“The effect on long-term rates, as empirical evidence shows, will be minimal, and likely to be more than offset by continuing liquidity expansion driven by the sizeable domestic savings,” the research said.
Given this favorable view on the economy, FMIC-UA&P is upbeat on fixed-income assets and equities.
On fixed income, it said the next few months should show better results as the government starts to pump prime and borrow more funds from the money market, resulting in more supply in the market.