The Philippines’ GDP growth is projected to accelerate to 5.9 percent in the second quarter from 5.7 percent in the first quarter, driven by high employment, increased government spending, and controlled inflation. This forecast comes from First Metro Investment Corp. (FMIC) and the University of Asia and the Pacific (UA&P).
“We project a mild acceleration in GDP growth to 5.9 percent in Q2,” FMIC and UA&P stated in their latest Market Call report. This anticipated growth surpasses the 4.3-percent expansion recorded in the second quarter of the previous year.
For the entire year of 2024, FMIC and UA&P have maintained their six percent growth forecast, which is at the lower end of the government’s target range of six to seven percent.
Despite the first quarter GDP growth being lower than expected, FMIC and UA&P remain optimistic. They attribute this optimism to sustained high employment levels, increased government spending, and inflation remaining within the target range, all of which are expected to boost domestic demand and economic acceleration starting in the second quarter.
Inflation is expected to rise to an average of 3.9 percent in the second quarter from 3.3 percent in the first quarter, primarily due to base effects. However, FMIC and UA&P predict it will stabilize around three percent by August, as crude oil prices have fallen below $80 per barrel. Inflation was recorded at 3.8 percent in April, up from 3.7 percent in March, with an average of 3.4 percent in the first quarter, aligning with the government’s two to four percent target.
Additionally, FMIC and UA&P anticipate that the Bangko Sentral ng Pilipinas (BSP) will reduce interest rates by 25 basis points in the third quarter. The BSP recently held the key interest rate steady at 6.50 percent, its highest in 17 years.
Regarding exports, FMIC and UA&P do not expect them to exceed a 10 percent growth for the full year 2024, citing mixed recovery patterns in the global economy. The country’s merchandise exports fell by 4.1 percent to $55.32 billion in 2023 from $57.71 billion in 2022. However, in the first quarter of 2024, total merchandise exports increased by 4.8 percent to $17.98 billion from $17.16 billion in the same period of the previous year.