IMPROVED household spending and base effects could boost the economy in the second half, helping the government meet the lower end of its 5.5% to 6.5% growth target, the Department of Finance (DoF) said.
“We do think maybe the growth will be faster (in the second half) to be able to meet at least the 5.5%” Finance Undersecretary and Chief Economist Domini S. Velasquez told BusinessWorld on the sidelines of an event on Friday, referring to the lower end of the target range.
Ms. Velasquez said household consumption, which accounts for over 70% of the economy, will remain the key growth driver, aided by easing inflation and lower interest rates.
Inflation eased to a nearly six-year low of 0.9% in July, bringing average inflation in the first seven months to 1.7%.
“Now that we’re in the first half at 5.4%, we think we’ll be able to reach at the minimum 5.5%. Part of it is due to base effects since our growth was low in the second half last year,” she said.
In the first half, gross domestic product (GDP) growth averaged 5.4%, against the year-earlier 6.2%.
Economy Secretary Arsenio M. Balisacan has said that GDP must grow by 5.6% for the rest of the year to achieve the low end of the full-year target.
“Lower interest rates also provide additional support for consumption and investment,” Ms. Velasquez said.
However, she cautioned that the Philippines is not “insulated from external events.”
Ms. Velasquez noted that trade may offer a “temporary contribution” as exports rose 17% in July.
The Philippine Statistics Authority (PSA) reported that exports grew 17.3% to $7.34 billion, while imports declined 2.3% to $11.38 billion in July.
“Although there are uncertainties, we do think that the structural reforms, the reforms that we put in place for the long term, should help the Philippines weather this uncertainty,” she said.
The government approved P231.25 billion worth of investments under the Corporate Recovery and Tax Incentives for Enterprises to Maximize Opportunities for Reinvigorating the Economy.
The 19% tariff rate for the Philippines imposed by US President Donald J. Trump took effect on Aug. 7.
Nicholas Antonio T. Mapa, chief economist at Metropolitan Bank & Trust Co. expects a further recovery in agriculture to help lift growth in the following quarters.
“The main reason for that is because last year, which is where we saw a lot of negatives for agriculture output, we had El Niño. This year, no El Niño. However, we’re running into a La Niña spell starting next month,” he said in his presentation at the same event.
Mr. Mapa also said household spending will gain ground due to lower inflation, with investments rising as the Bangko Sentral ng Pilipinas (BSP) cuts rates.
The BSP on Thursday cut its key policy rate by 25 basis points to 5% for a third meeting in a row. — Aaron Michael C. Sy