The Philippines is expected to remain one of the fastest growing Asian economies in the fourth quarter, with its gross domestic product (GDP) estimated to expand by at least 6.5 percent during the period from a year ago.
This was according to the latest issue of “Market Call,” a joint publication of First Metro Investment Corp. and University of Asia and the Pacific, which said significant infrastructure spending in the last three months of the year would likely keep the Philippines’ growth rate robust.
“GDP growth for the fourth quarter should be at least as good as the average of 6.5 percent in the first three quarters since infrastructure spending is going full blast,” the report said.
The comment was made following pronouncements from the budget department that government spending, especially on infrastructure, was targeted to substantially increase in the latter part of the year to compensate for the lower-than-programmed expenditure in the earlier months.
In the third quarter, the Philippines grew by a surprising 7.1 percent from a year ago, thus becoming the fastest growing economy in Southeast Asia for the period.
This brought the country’s average growth rate for the first three quarters to 6.5 percent, one of the fastest so far this year in Asia.
The country’s growth performance was attributed to the year-on-year increase in government spending (which was, however, lower compared with what has been targeted), higher household consumption on the back of rising remittances and rise in investments by local firms.
Economists said the Philippines in the first three quarters landed on an economic “sweet spot,” as its high economic growth came with a modest inflation rate.
The Market Call said the favorable combination of high growth and low inflation would likely be sustained in the fourth quarter.
Inflation averaged at 3.2 percent in the first three quarters. For the first 11 months, the latest report of the National Statistics Office on consumer prices showed that inflation averaged at 3.2 percent.
“We see inflation to average 3.2 percent this year,” The Market Call said.
This average is at the low end of the government’s official inflation target of 3 to 5 percent for this year.
The combination of high growth rate and low inflation makes the Philippines worthy of recognition at a time when the global economy remains weak, economists said.
They also said, however, that the Philippines remains challenged with a significant poverty incidence, which reflects the failure so far of economic growth to improve the financial conditions of the poor.
They said investments must be channeled to sectors that will employ people belonging to poor households.