Moody’s sees higher PH growth of 6.3%

PHILIPPINE economic growth could have accelerated in the second quarter following higher merchandise exports and government spending, Moody’s Analytics said.

It estimated April-June growth of 6.3 percent, up from 5.7 percent in the first quarter and 4.3 percent a year earlier, and also within the government’s 6.0- to 7.0-percent target for 2024.

Moody’s noted that as growth “went backwards” last year, the “low base effect” could help gross domestic product (GDP) growth reach higher levels.

A 7.1-percent contraction in government spending, along with high inflation, has been blamed for growth having slowed to 4.3 percent in the second quarter of 2023 from 6.4 percent three months earlier.

“This time, robust goods exports and government spending should drive growth,” Moody’s said.

However, private consumption and investment growth “will stay muted” due to elevated interest rates, and “a slower increase in tourist arrivals could see service exports lose some of their shine,” it added.

Budget Secretary Amenah Pangandaman has said that there will be no repeat of last year’s understanding, with government agencies having been ordered to ramp up fund utilization.

The utilization rate was said to have improved to 94 percent as of end-May, from 91 percent a year earlier, which Pangandaman said put the government “on track to achieving our growth targets, especially for 2024.”

Key interest rates, meanwhile, currently remain at a 17-year high following 450 basis points of rate hikes beginning in May 2022 to address surging inflation.

The Bangko Sentral ng Pilipinas (BSP) could begin cutting interest rates next week, with inflation risks now tilted toward the downside.

Consumer price growth could have breached the 2.0- to 4.0-percent target in July, the BSP said last week, but is expected to decline for the rest of the year.

Moody’s 6.3-percent GDP estimate is higher than the 6.0-percent consensus based on analysts’ forecasts.

Not all expect an improvement from the first quarter, but those who forecast an acceleration all said that improved government spending would have contributed to growth.