The economy is expected to have grown by 7.5 percent in the second quarter, a slower pace of growth compared to 8.3 percent in the quarter this year, according to a bank economist.
Security Bank Corp. chief economist Robert Dan Roces said on Thursday, Aug. 4 that they estimate a more modest second quarter year-on-year growth of 7.5 percent taking into account the high inflation during the period.
As of end-June, the inflation rate has averaged at 4.4 percent, above the government target of two percent to four percent. Inflation in May hit the five-percent level for the first time this year at 5.4 percent versus 4.9 percent in April. By June, inflation passed the six percent level at 6.1 percent, a three-year high.
“The slower growth in private consumption on the back of inflation headwinds may have been offset by better government expenditure, good capital formation, and strong imports,” said Roces in a commentary.
He also said that the impact of the still ongoing Ukraine war with Russia will continue to add to inflation pressures up to the third quarter this year.
“The spillover effects of inflation pressures and several geopolitical headwinds may still be felt this 3Q22 (third quarter 2022) and continue to constrain private consumption’s full potential and thus slow down growth. However, recent trends have shown commodity prices settling in a new, lower range, and as such may provide price relief by 4Q22 (fourthe quarter 2022) in time for the peak consumption season,” said Roces.
To prevent a disanchoring of inflation expectations, the Monetary Board of the Bangko Sentral ng Pilipinas (BSP) has raised the key rate by 125 basis points (bps) since May 19, bringing the benchmark rate to 3.25 percent as of July 14.
BSP Governor Felipe M. Medalla said the economy can absorb further monetary policy tightening. He has already announced that during the Monetary Board’s next meeting, on Aug. 18, they intend to increase the BSP rate by 25 bps to 50 bps more.
The government will announce the July inflation rate on Aug. 5 while the second quarter GDP number will be released on Aug. 9.
The BSP forecasts July inflation to range to a high of 6.4 percent or a low of 5.6 percent. The midpoint of the BSP forecast is six percent for July.
As for the GDP, Medalla said they expect the second quarter growth to be between eight percent and nine percent, close to the first quarter GDP growth of 8.3 percent.