Faster GDP growth seen in 2nd quarter

MANILA, Philippines — The country’s gross domestic product (GDP) growth will likely accelerate to 5.9 percent in the second quarter from 5.7 percent in the first quarter, supported by high employment, government spending and within-target inflation, according to First Metro Investment Corp. (FMIC) and 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 said in the latest Market Call report.

The growth forecast is also faster than the 4.3-percent expansion in the second quarter last year.

For full-year 2024, FMIC and UA&P retained their six percent growth forecast, the low end of the government’s six to seven percent target.

Despite the lower than expected first quarter GDP growth, FMIC and UA&P said elevated employment levels, ramped up government spending and within-target inflation should support strong domestic demand and enable the economy to accelerate starting in the second quarter.

While the two institutions expect inflation to quicken in the second quarter to average 3.9 percent from 3.3 percent in the first quarter largely due to base effects, they said this should be closer to three percent by August and the rest of the year as crude oil prices have returned to below $80 per barrel.

Inflation picked up for the third straight month to 3.8 percent in April from 3.7 percent in March.

Average inflation in the first quarter was 3.4 percent, within the government’s two to four percent target.

FMIC and UA&P said they also expect the Bangko Sentral ng Pilipinas (BSP) to cut interest rates by 25 basis points in the third quarter.

At its last policy meeting held earlier this month, the BSP kept the key interest rate at 6.50 percent, the highest in 17 years.

“As the global economy shows mixed patterns of recovery, we don’t expect exports to exceed 10 percent full-year growth in 2024,” FMIC and UA&P said.

The country’s merchandise exports declined by 4.1 percent to $55.32 billion in 2023 from $57.71 billion in 2022.

In the January to March period, total merchandise exports went up 4.8 percent to $17.98 billion from  $17.16 billion in the same period in 2023.