Economy expected to grow faster in second half

Economic growth could moderate to 5.8 percent in the second quarter of this year with still-high inflation constraining consumer spending, private sector economists said in a report by Manila Times.

"We expect only a mild slowdown in Q2 (second quarter) by around 0.5 percent percentage point or slightly below 6 percent YoY (year on year)," First Metro Investment Corp. (FMIC) and the University of Asia and the Pacific (UA&P) analyst said in the May issue of the Market Call report.

Inflation fell to 6.6 percent in April after hitting a 14-year high of 8.6 percent in January. The rate, however, is expected to remain above the Bangko Sentral ng Pilipinas' 2.0- to 4.0-percent target up to the third quarter.

"The economy should rebound in H2 (the second half) as inflation continues to ease to average 3.3 percent in Q4 (fourth quarter)," the UA&P and FMIC economists said.

Amid the second-quarter slowdown, however, they said that services subsector such as transport and storage, and accommodations and food services were likely to post "muscular growth."

"The services sector will continue to lead growth," the economists said, "as more Filipinos eat out and revenge tourism (both local and foreign) expands further."

Construction, meanwhile, "should take pole position in the growth race" with major projects such as the Metro Manila Subway, North-South Commuter Rail, South Expressway Extension, and other, and key public-private partnership projects moving forward.

Hot and dry weather during the April-June period is expected to lead to increased work on big-ticket projects and also prompt travelers to patronize beacher and cooler locations such as Baguio in the north.

"These large contributors to employment and slower inflation should combine to power more robust consumer spending, heretofore hindered by elevated inflation," the economists said.

As for the peso-dollar rate, they said that "depreciation mode" would remain with the currency to be weighed down by large trade deficits, and the Bangko Sentral ng Pilipinas "not going in step with the Fed (US Federal Reserve) in the latter's rate hikes."

The US central bank hiked interest rates anew earlier this month while the BSP paused. The UA&P and FMIC economists said the Fed could continue tightening policy in June.

The Philippines' economic growth slowed to 6.4 percent in the first quarter, but it still outperformed consensus estimates of a steeper downturn due to high inflation and interest rate rises.

It was, however, down from 8.0 percent a year earlier and 7.1 percent in the last three months of 2022.

The government is targeting 6.0- to 7.0-percent GDP growth this year, down from 2022's above-target result of 7.6 percent.