Philippine Economy Likely Grew by Just 2.5% in Q2, Says UA&P

MANILA, Philippines — The Philippine economy may have lost further momentum in the second quarter, with growth slipping to another postpandemic low as stubborn inflation weighed on consumer spending and weak business confidence curbed investment. This is according to University of Asia and the Pacific (UA&P) economists, who lowered growth forecast for the April-to-June period to 2.5 percent from the previous estimate of 2.6 percent. If realized, it would be weaker than the already subdued 2.8 percent expansion in the first quarter. READ: PH Q2 growth seen easing to over 17-year low In its latest The Market Call report, UA&P said there were signs of relief in June after oil prices had eased following a ceasefire between the United States and Iran. Inflation slowed to 6.4 percent from 6.8 percent a month earlier, though it remained more than double the 3 percent target of the Bangko Sentral ng Pilipinas (BSP). That respite, however, appears to have been short-lived. As the Gulf conflict enters its sixth month, renewed fighting has sent global crude prices back to more than $100 a barrel, raising costs for oil-importing economies like the Philippines. “Some soft recovery is underway, though persistent above-target inflation and subdued business optimism may undermine the recovery narrative,” the economists said. UA&P warned that the outlook remained overshadowed by what it called a triple threat: higher oil prices, an outsized minimum wage increase and severe El Niño conditions. Together, those factors are seen to push inflation beyond 7 percent again, forcing the BSP to keep monetary policy tight. Since April, the central bank has raised its benchmark interest rate by a cumulative 50 basis points to 4.75 percent in an effort to contain inflation, though higher borrowing costs also risk further slowing economic activity. READ: Survey: Fuel shock leaves 4 in 10 Filipinos struggling UA&P said mounting inflationary pressures could drive long-term government bond yields higher and prompt an additional 50 basis points of rate hikes from the BSP. Even so, it expects the local financial markets to remain largely range-bound until there is clearer progress toward peace in the Middle East. “Trading will likely center around second quarter earnings reports, with some leeway in store as companies signaled conservative forward earnings guidance in the thick of the Middle East conflict,” the report said. INQ