Moody’s Analytics forecasts the country’s economy grew slower in the third quarter by 5.7 percent versus 6.3 percent in the previous quarter, while the inflation rate likely increased for the month of October.

Based on its latest Economic Review for Asia Pacific, Moody’s projects the inflation for October rose to 2.3 percent compared to September’s 1.9 percent.

According to Moody’s on Monday, Nov. 4, they expect domestic economic growth to have slowed down in the third quarter because of a subdued consumption spending amid the central bank’s easing monetary policy stance.

It further noted that “government spending and private investment will drive growth while private consumption will be muted because recent rate cuts need time to filter through the economy.”

Moody’s also said that exports “could lose some shine due to soft external demand for Philippine goods and a slower increase in international tourist arrivals.”

The government’s Philippine Statistics Authority will announce the October inflation rate on Tuesday, Nov. 5 and the third quarter GDP on Thursday, Nov. 7.

The Bangko Sentral ng Pilipinas’ (BSP) Monetary Board will factor in both economic indicators when it meets for its last policy meeting for this year on Dec. 19. 

During its last two policy rate decisions on Aug. 15 and Oct. 16, the BSP cut its target reverse repurchase (RRP) rate by 25 basis points (bps) each for a total of 50 bps. Currently, the target RRP or the policy rate is at six percent.

The BSP projects the October inflation will settle within the range of two percent to 2.8 percent. As of end-September, the consumer price index (CPI) stood at an average of 3.4 percent, within the government's two percent to four percent target range.

The central bank said the higher prices of selected food items such as vegetables, fruits, and fish will put pressure on the CPI. Other sources of upward price pressures are the peso depreciation and the increase in local oil prices.

The BSP has said that the Monetary Board will continue to consider a measured approach to its policy settings to ensure the country’s price stability is “balanced” with the sustainable GDP growth and employment.

The central bank’s Monetary Board expects the economy will continue “to be strong” amid improved prospects for household income and consumption, investments, and government spending. It noted that these factors will be supported by the reduction in the policy rate and the reserve requirement ratios. Banks' reserve ratios were further reduced in October, releasing excess funds in the financial system.

Last August, the credit rating agency Moody’s affirmed the Philippines “Baa2” investment-grade credit rating with a firm “stable” outlook, citing the country’s “robust” macroeconomic fundamentals, efforts to liberalize the local economy and to strengthen fiscal consolidation.

Moody’s recognized the government and BSP’s efforts to implement all efforts to improve macroeconomic fundamentals while it noted that the “passage of reforms over the past several years to liberalize the Philippine economy will support medium-term growth potential by supporting a business-friendly environment and attracting foreign investments.”

An investment-grade rating signifies low sovereign risk, helping the country secure cheaper funding and redirect funds from interest payments to social programs and projects, it added.