Higher electricity sales growth, easing inflation rate, improving exports, better agricultural output and the creation of a million jobs are pointing towards an even faster output growth in the second quarter of 2012 from the 6.4% gross domestic product (GDP) growth posted in the first quarter.
The latest report of FMIC and UA&P capital market research predicts that with better agricultural harvests and more infrastructure spending, GDP growth in the second quarter to even exceed the 6.4% expansion recorded in the first quarter.
“The upgraded outlook for the second quarter GDP expansion is more remarkable given the slowdown of the U.S. economy and China and the lingering banking and debt crisis in the Euro-zone.”
“The outcome was fairly positive with no Greece exit from the Euro-zone followed by some concessions by Germany in favor of growth for beleaguered Spain and Italy,” the report noted.
The report expects an even better GDP growth performance in the second quarter with Meralco electricity sales rising by 11.8% in May from 8.3% recorded in April.
With the economy’s strong rebound in the first quarter, labor employment also increased by one million for the year ending April 2012.
“Despite an increase in the labor force participation rate to 64.7% from 64.2% a year ago, the labor force survey (LFS) of the National Statistics Office (NSO) showed a decline in the unemployment rate to 6.9% down from 7.2% in January 2012 and April 2011 even as total labor force expanded by 2.5% over the same period.”
Inflation would likely average 2.9% as compared to year-on-year growth as well as quarter-on-quarter mainly due to the unabated fall in oil price for the whole of June, the report said.
“Exports are likely to average a 5% growth in the second quarter with slightly better prospects in the second semester. The latter period will be characterized by domestic demand stimulus in China and election spending in the U.S.”
FMIC and UA&P forecasts that monetary policy to remain neutral for the rest of the year, even though the BSP has scope and need for further easing in order to narrow the differential between domestic and foreign interest rates.
With favorable conditions in the financial markets, and stable gains in remittances from overseas Filipino workers (OFWs), the peso-dollar rate will have an appreciation bias for most of the second semester, the report added.