Economy seen growing by 5-6% in Q4

MANILA, Philippines—The Philippine economy is likely to sustain a 5-6 percent growth in the fourth quarter given the government’s leeway for fiscal spending, the strong remittance inflows from overseas and easy monetary policy, a joint research by First Metro Investment Corp. and University of Asia and the Pacific said.

In their joint publication “The Market Call” for October, FMIC-UA&P also projected another 25-basis-point cut in the Bangko Sentral ng Pilipinas’ overnight borrowing rate—already at a low of 3.75 percent—given the benign inflation rate trend.

The FMIC-UA&P research expects inflation to average 3.5 percent in the fourth quarter, well within the BSP’s target range of 3-5 percent. The research pointed out early signs of a reversal of the rise in consumer prices in August, suggesting that the underlying low-inflation trend remained intact.

“This and the weaker (third quarter) economic data to be released in October lead to expectations of a 25-basis point cut in the BSP’s policy rates in the fourth quarter,” the report said.

Growth in the final quarter of the year, the research said, would be driven by “solid domestic demand especially with the national government having much fire power to spend for the rest of the year, and OFW (overseas Filipino workers) remittances remaining robust.”

As such, while part of the economic data flow for the “ghost month” of August rang a negative tune, the research said the outlook for the fourth quarter was “chiming a more cheery note.”

The research noted that “extra-strong” infrastructure and capital outlays might be in store for the rest of the year as the fiscal deficit until August was just P71.2 billion, or only a fourth of the government’s full-year ceiling of P279 billion.

“This would leave much room for the government to keep up or even hasten the pace of spending for the rest of the year and provide a much-needed stimulus in the face of uncertainties abroad. Besides, election spending, both public and private, will start in October 2012 when candidates are supposed to file their candidacies with the Commission on Elections,” the research said.