Philippine economy on a roll

 Economy seen growing faster

Story by Niña Myka Pauline Arceo 
Manila Times
26 March 2024

ECONOMIC growth will likely pick up this year due to higher infrastructure spending by both the government and the private sector, economists from the University of Asia (UA&P) and the Pacific and First Metro Investment Corp. (FMIC) said.

First quarter growth, in particular, was forecast to hit 6.1 percent — up from 5.6 percent in the fourth quarter of 2023 but slightly lower than the year-earlier 6.4 percent.

"The economy looks set to accelerate in 2024 ... as infrastructure spending goes into high gear with the national government (NG), buoyed by official development assistance funding, and public-private partnership projects gain traction," the economists said in the March edition of their Market Call report.

Gross domestic product (GDP) growth came in at 5.6 percent last year, slowing from 2022's 7.6 percent and missing the government's 6.0- to 7.0-percent target.

This year's growth goal currently stands at 6.5-7.5 percent, although this could have been lowered last Friday following an economic managers' meeting. Finance Secretary Ralph Recto told reporters last week that a 6.0- to 6.5-percent could be adopted.

"With actual NG spending in 2023 exceeding program by 2.0 percent, we think the administration will start 2024 with a bigger bang compared to 2023," the FMIC and UA&P economists said.

They noted that the Department of Public Works and Highways alone had been given a P1-trillion budget this year and that the $3-billion Ninoy Aquino International Airport expansion project had just been awarded.

And while inflation may have picked up in February — to 3.4 percent from 2.8 percent a month earlier — "we don't see a repeat" as rice prices abroad have started dropping and as global oil price rises will be weighed down by surplus capacity and a weak Chinese economy.

Consumer price growth could hit 3.7 percent in the first half but drop below 3.5 percent by the third quarter, and the full-year average will fall within the Bangko Sentral ng Pilipinas' 2.0- to 4.0-percent target.

The economists said the first quarter average could be lower at 3.2 percent and maintained a full-year forecast of 3.8 percent.

Exports, meanwhile, are expected to rebound this year but the Philippines will likely again run a trade deficit as imports will also remain elevated.

"We should see a modest 5.0%-10.0% increase in exports for 2024 as the global economy recovers," the FMIC and UA&P economists said.

"However, the trade deficit will remain above $4.0-B (billion) per month on average," they added.

"But hefty rice imports, transport equipment especially related to ongoing train systems expansion, and crude oil prices remaining elevated despite limited upside should boost imports."

The peso is expected to strengthen in the first half as the dollar weakens slightly but will "resume falling as economic growth takes a faster pace."

Bond yields, meanwhile, will depend on whether the impact of inflation is positive or negative, and share prices that rose up the middle of March are expected to correct in April-May "but recover with the economy and good corporate earnings for Q1 (the first quarter)."