The latest issue of Newsbriefs, a weekly digest produced by the Institute for Development and Econometric Analysis, Inc. (IDEA), says that as per National Statistics Office report, the Construction Materials Price Index (CMPI) in the National Capital Region for the month of August rose by 2.9% on a year-ago basis.
The increase was brought about by changes in index components particularly in the Cement and Lumber indices which rose by 3.5% and 4.3% respectively. On a monthly sequential basis, the index grew by 0.6% from July. Aside from the aforementioned indices, commodities such as fuel, steel bars and glass products also posted higher prices during the month.
IDEA said upticks in construction prices in the region could have been pushed by demand-led conditions after the inundation brought by typhoons and storms which led to property damages. The situation could have driven reconstruction efforts fueled by the demand side.
Likewise, setting in infrastructure development, the government recently sealed off a $71.6-million loan from the Republic of Korea for the rehabilitation of the Puerto Princesa Airport Development Project. The deal executed with the Export-Import Bank of Korea covers 30 years of payment with 0.1% interest.
Furthermore, despite an appreciating currency and risks in the exports sector, a possible positive trajectory awaits the Philippine economy. GlobalSource Partners, a US-based consultancy firm, revised their GDP growth rate forecasts from 5.5% to 5.8% after stating that the robust consumption side of the economy will be supported by strong peso remittances. However, the hiking currency appreciation still poses risks to these household’s purchasing power.
It was also reported by IDEA that marking a four year high, the Philippine peso appreciated by almost 5% since the year started driven by external developments such as the suspected third round of quantitative easing in the United States and prospects on the ECB’s planned bond purchasing program. Investor appetites favored risky assets on hopes of further appreciation given the “advantageous” position in emerging markets.
Lastly, recognizing stalled domestic electricity rate changes and volatile global grain prices as risks, the Monetary Board has raised its inflation forecasts for the current and next year from 3.1% to 3.4% and 3.2% to 4.1%, accordingly. Aside from movements in the commodity markets, the Monetary Board has also emphasized capital flows heading its way to the country as investors shun from inflationary expectations in the US--- that is given the speculation of a third quantitative easing and the preference for risky assets in emerging regions.
It is also worth mentioning that foreign investments for the first semester increased heaps from year-ago growth rates capping off at 16% net inflow growth. This is attributed to the investor’s continued confidence in the country and the anchored inflationary pressures as grounded by central bank actions, according to the researchers of IDEA.
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