SINGAPORE – Philippines’ growth likely bounced back to the 6% level last quarter as inflation cooled, giving the central bank flexibility to pursue more monetary easing this year, Economic Planning Secretary Ernesto Pernia said.
Gross domestic product growth in the third quarter should be “significantly better” than the April to June period, hitting at least 6%, Pernia said in an interview on the sidelines of a Philippines-Singapore business summit in Singapore. Expansion in the second quarter eased to 5.5%, the slowest pace in four years.
“I would expect another easing of the policy rate, maybe another 25 (basis points),” and there could be further cuts in banks’ reserve requirement ratio too, the economic planning chief said on Tuesday. Pernia doesn’t sit in the central bank’s policy making Monetary Board.
Bangko Sentral ng Pilipinas has cut its benchmark interest rate three times this year to boost growth, and last week set another reduction in the ratio of funds banks must hold in reserve as authorities seek to reinvigorate an economy that expanded below 6% in the first two quarters of 2019.
Growth was hobbled earlier this year by a dispute over the 2019 budget that delayed its passage by four months. With that standoff now resolved, the economy is set to pick up in the second half as government spending “markedly increased,” Pernia said.
Expansion this quarter will further accelerate on seasonal consumption spending, Pernia said, penciling in growth of 6% to 6.5% for the full year. The 7% top end of the 2019 target, is probably not reachable, he said.
There are no plans to implement a stimulus like in Thailand but stronger public spending “is already in itself a kind of stimulus,” he said. Among infrastructure projects queued up are the new airport in Bulacan province north of the capital, a Manila subway, and the upgrade of the Manila airport.
The impact of the US-China trade tensions on Philippines is a minimal 0.1 percentage point cut in the GDP growth, and the nation, like its Southeast Asian peers, is starting to get some of the semiconductor business leaving China, Pernia said.
An impeachment inquiry in the US “may distract” President Donald Trump and halt the imposition of additional tariffs on China, the Philippine official said.