BSP says consumption recovered in 2nd quarter

CONSUMPTION growth may have improved in the second quarter of this year because of higher school expenses, sustained remittances, and easing worries by businesses, the Bangko Sentral ng Pilipinas (BSP) said.

“In the second quarter, we expect consumption to improve as enrollment-related expenses, among others, are made. Firms may also be less cautious given early signs of stabilization that continue to be reported in the global financial and goods markets,” BSP Governor Amando Tetangco Jr. said in an e-mail to reporters.

The growth in the country’s gross domestic product (GDP), an indicator of economic performance, slowed sharply to 0.4 percent in the first quarter as consumption, the main driver of expansion, nearly collapsed.

Philippine economic managers had forecast GDP growth to range between 0.8 percent and 1.8 percent this year.

Tetangco said the drop in consumption in the first quarter was due to a very bleak scenario that loomed at the end of last year. He said individuals increased precautionary savings, while firms may have turned cautious while waiting for clearer signals on demand trends.

“What the BSP tries to do is provide an environment where economic agents can make better business plans and sufficiently-informed consumption and investment decisions. This is why we continuously improve the communication of our policy intentions. We want to avoid any equivocation in the transmission of policy to economic action,” Tetangco said.

The governor said remittances, which contribute 10 percent of GDP, will sustain their growth this year on steady demand for Filipino workers abroad and the expanded remittance network of Philippine banks.

“We remain positive on remittance growth. Remittance flows will continue to be supported by the steady demand for our workers abroad, specially the professional and skilled workers,” he said.

The Department of Labor and Employment (DOLE) had said the Philippines forged several hiring agreements with countries such as Canada, Australia, Japan, Qatar and Saudi Arabia, and more recently with South Korea.

“The expanded reach of banks and other financial institutions to overseas Filipinos is also expected to further encourage remittance growth going forward,” Tetangco said.

DOLE projected remittances to grow 3.6 percent this year to $17 billion from $16.4 billion last year buoyed by increasing deployment of Filipino workers.

Remittances coursed through banks reached a record high of $1.48 billion in May.

In the first five months, remittances reached $6.98 billion, representing a 2.8-percent increment from the level recorded in the same period last year. Remittances from both sea- and land-based workers posted gains at 4.6 percent and 2.4 percent, respectively. –Maricel E. Burgonio, Senior Reporter, Manila Times