Philippines Economy May Post Above 4% Growth in Q4: UA&P

MANILA, Philippines — The Philippine economy may post above four percent growth in the fourth quarter, driven by a rebound in infrastructure spending and stronger demand, according to the University of Asia and the Pacific (UA&P). UA&P noted that while third-quarter Gross Domestic Product (GDP) growth is expected to be similar to the tepid 2.3 percent gain in the second quarter, amid August floodings and delayed infrastructure spending, some positive signs have emerged. The record employment figures, export performance, and overseas Filipino workers’ (OFW) remittances in June are anticipated to cushion the economy from temporary disruptions in the third quarter. "These, together with a huge rebound in infrastructure spending in the fourth quarter, should bring the economy back to above four percent growth path," UA&P said. The university also anticipates economic growth to pick up in 2027. Factors such as the return of government infrastructure spending, softer crude oil prices, and better demand conditions are identified as tailwinds. The economy grew by 2.6 percent in the first half of the year, falling short of the government’s revised annual growth target of 3.5 to 4.5 percent. For 2027, the government aims to achieve its adjusted growth goal of five to six percent. While the country achieved record employment of 50.8 million in June, UA&P expects employment gains to moderate. This is due to the historic minimum wage increase in the National Capital Region, which is likely to raise labor costs and reduce firms' appetite for hiring more. In addition to the minimum wage hike, the uncertain Middle East situation, agricultural damage from heavy rains, and a potentially aggressive El Niño may keep inflation above target until 2027. Inflation slowed to 6.1 percent in August from 6.2 percent in July. Following the Bangko Sentral ng Pilipinas (BSP)’s decision to raise rates by 25 basis points to five percent at its last meeting, UA&P expects one more 25-basis-point rate hike for the year. Regarding remittances, UA&P forecasts low single-digit growth for the remainder of the year. "If lingering host-country inflation and Middle East deployment friction persist, annual inflows may face downside risks relative to the BSP full-year cash remittance growth target of 2.7 percent ($36.6 billion)," it said. Cash remittances in the first half reached $17.15 billion, a 2.4 percent increase from $16.75 billion in the same period last year. In terms of its local currency outlook, UA&P stated that short-term pressures from oil price volatility and trade deficits may push the peso to 63 per dollar.