The Philippine economy will have a full-year growth of 5.7 to 6 percent, driven by strong domestic demand, government spending, robust dollar remittances from overseas Filipino workers and exports, according to latest report by FMIC and UA&P Capital Markets Research.
The report noted that the underlying low inflation trend remains intact, considering that crude oil prices have eased from its recovery in July and August.
“We are expecting inflation to average 3.4% in the third quarter and 3.5% in the last quarter. This, together with weaker economic data in October, leads to expect a cut of 25 basis points cut in BSP’s policy rates in the fourth quarter,” said FMIC and UA&P.
Extra strong infrastructure and capital outlays are in store for the rest of the year as the fiscal deficit until August was just P71.2 billion or only a fourth of the full-year target of P279 billion.
“This would leave much room for the national government to keep up or even hasten the pace of spending for the rest of the year and provide a much needed stimulus in the face of uncertainties abroad.”
The deficit for the rest of 2012 is not expected to exceed an average of P40 billion per month with the full-year deficit of around P230 billion, the report said.
“This would mean a primary surplus of P90 to P10 billion 0.8-0.9% of gross domestic product (GDP). Combined with lower interest rates and faster-than-expected economic growth, we expect the debt ratio to fall to 48.6 – 48.8%.”
Despite the unfavorable conditions in the world economy, exports would continue grow above 5 percent as the country’s copper smelter goes back into full operations and improving electronics exports in the fourth quarter with the boost from the US election presidential election in November.