Economy likely expanded 6.8% in Q2, says Moody’s

Economic growth in the Philippines likely accelerated to 6.8 percent in the second quarter from 6.4 percent in the first quarter, lifted by stronger exports of electronics, Moody’s Analytics, a division of debt watcher Moody’s Corp., said in a report over the weekend.

“Philippine GDP growth likely accelerated to 6.8 percent year-on-year in the second quarter, compared with 6.4 percent in the opening three months of the year. The main boost will come from exports, which have been expanding rapidly in recent months largely because of stronger shipments of electronics,” Moody’s said.

The economy grew 6.4 percent in the first quarter, below expectation, as government spending slowed from the same quarter last year in the run-up to the presidential elections.

The government also expects GDP growth to accelerate from the first quarter, as infrastructure spending picked up in line with the so-called “Build Build Build” infrastructure program.

Moody’s said domestic factors remained conducive to strong growth. Private consumption was seen to grow rapidly on rising incomes and favorable demographics.

“Investment will also expand rapidly as a result of a mixture of private and government projects,” it said.

The government is set to release the official second-quarter GDP data on Aug. 17.

The International Monetary Fund earlier cut its growth forecast for the Philippines this year to 6.6 percent from an earlier estimate of 6.8 percent, amid the slower-than-expected expansion of 6.4 percent in the first quarter.

IMF mission chief Luis Breuer, who visited Manila from July 26 to Aug. 9, also said the growth projection in 2018 was reduced to 6.8 percent from 6.9 percent previously.

Breuer said despite the downgraded growth forecast, economic growth was seen “to remain close to potential at 6.6 percent in 2017 and 6.8 percent in the medium term, supported by robust domestic demand and recovery in exports.”

The government expects economic growth this year to settle between 6.5 percent and 7.5 percent.

Breuer said structural reforms would be essential to sustaining rapid inclusive growth to significantly lower poverty and maximize the demographic dividend.

He said the comprehensive tax reform program was a very important initiative of the state because it would generate revenues to be used for priority projects, particularly those pertaining to social services and infrastructure.

The economy expanded 6.9 percent year-on-year in 2016, making the Philippines one of the fastest growing economies in the region, buoyed by robust fiscal spending, domestic consumption and investments.