Non-electronics products, which helped shore up exports in the second quarter amid a slack in electronics shipments, may continue to support economic growth for the rest of the year, according to DBS Group.
The financial service provider, in a research note, said the Philippine economy was projected to have grown by 5.6 percent year on year in the second quarter of the year, which would bring the first-semester growth to 6 percent.
DBS said that with a continually benign inflation situation, its forecast full-year growth of 5.3 percent might be achieved.
“The country is currently enjoying a sweet spot of high growth and low inflation,” DBS said. “High-frequency indicators have thus far painted a picture of continued economic growth.”
DBS said the easing of the central bank’s monetary policy—by a total of 75 basis points so far this year—would support domestic demand and had already translated into a 15.4-percent year-on-year growth in lending in the first half.
“Consumer spending should also remain strong and this has been reflected by car sales, which pushed to a 24-month high in July,” the group said.
“Meanwhile, exports actually rose in the second quarter despite no meaningful improvement in electronics shipments,” it added. “Instead, the slack was made up by a surge in non-electronics manufactures.”
DBS said the domestic economy continued to look benign for the rest of the year, which led it to expect a fourth reduction in the policy rate by another 25 basis points before the end of the year.
“With inflation still subdued at 3.2 percent year on year in July, there remains scope for further easing if needed,” DBS said. “This reflects our view that the (recent) floods will not pose a serious threat to the inflation outlook and that any price pressures will be temporary.”
The group continues to expect that full-year inflation will be at the lower end of Bangko Sentral Pilipinas’ target range of 3 percent to 5 percent.