Philippine Economic Outlook

The Philippine economy likely grew at a faster rate in April to June this year, compared to first-quarter level, as low prices encouraged consumers to spend more and given the rise in government outlays.

First Metro Investment Corp. (FMIC), the country’s leading investment lender, said the exports sector remained the biggest drag on the economy in the second quarter.

“The early second quarter signs point to a definite recovery,” FMIC said in its latest Market Call report, which comes out every month.

“Although there are still some negative signals, the outlook seems more promising,” the bank said.

In the first quarter, growth stood at only 5.2 percent, the slowest expansion in three years. The government wants to drive up growth to as much as 7.5 percent in 2015.

FMIC said the January to March slowdown was likely temporary.

In June, inflation fell to a record low of 1.2 percent.

Below-target headline inflation, pulled down by stable to lower food prices, should encourage more consumer spending in the second quarter onwards. Public infrastructure spending signaled a rebound from overall underspending in the first quarter as the administration boosted its April expenditures by 9 percent.

“The Philippine economy appears headed to a more sanguine second quarter performance as,” FMIC said.

The more optimistic outlook is bolstered by a seasonally adjusted annualized net job creation of 1.3 million in April compared to January 2015. Consumer spending received more fuel from overseas Filipino workers’ remittances, which were up by 5.1 percent in April.

As a result of strong remittance inflows and business process outsourcing earnings, as well lower imports, the country reported a balance of payments (BOP) surplus of $877 million in the first quarter, a huge reversal from $4.1 B deficit in the same quarter of 2014.

Despite the better prospects, FMIC said prospects were not universally bright.

“The fly in the ointment came from the 4.1-percent drop in exports also in April,” FMIC said.

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