Moody’s Analytics, on Monday, Aug. 5, forecasts the country’s second-quarter gross domestic product (GDP) growth will be higher at 6.3 percent compared to the previous quarter’s 5.7 percent due to base effects, positive exports, and increased government spending.
In its latest Economic Review for Asia Pacific, Moody's also predicted that July inflation may reach only 3.7 percent – the same as June’s consumer price index (CPI) – and will not be as high as the central bank and the market expected it to be. The Bangko Sentral ng Pilipinas (BSP) forecasts July CPI will be above target at four percent to 4.8 percent amid high electricity rates and elevated prices of vegetables, fruits and meat.
According to Moody’s, the Philippines’ GDP growth for the April to June period will accelerate to 6.3 percent versus the first quarter’s 5.7 percent because of a low base effect.
“A year earlier, growth slowed substantially to 4.3 percent, and in quarter-on-quarter terms, GDP went backward. This time, robust goods exports and government spending should drive growth,” said Moody’s.
Moody’s noted that private consumption and investment growth “will stay muted as high borrowing costs weigh on budgets” while a “slower increase in tourist arrivals could see service exports lose some of their shine.”
The government’s GDP projection for 2024 is six percent to seven percent and 6.5 percent to 7.5 percent for 2025.
Meanwhile, the BSP has prepared the market to anticipate that inflation could peak in July and will exceed the government target range of two percent to four percent.
The BSP said that besides high power rates and selected food price increases, the elevated domestic oil prices continue to be the “primary sources of upward price pressures” for July.
However, it also noted that July inflation could be nearer four percent on the back of a stronger local currency vis-à-vis the US dollar. It pointed to the lower rice prices which could hold the CPI closer to the higher end of the official target band.
The Philippine Statistics Authority will release the July CPI numbers on Aug. 6 and the second quarter GDP report on Aug. 8.
The BSP’s Monetary Board will meet on Aug. 15 for its fifth of seven policy meetings for the year.
For this year and in 2025, the BSP risk-adjusted inflation forecast is 3.1 percent. Rice prices have been driving up inflation since August last year. Before that, in 2022 it was oil prices and then it shifted to food prices.