RP to stay afloat on retail sales, public spending-report

The Philippine economy will stay afloat in the first half of this year on the back of an improvement in retail sales and government spending, indicating that the state’s full year growth target will be met.

In a report, First Metro Investment Corp. and University of Asia and the Pacific (UA&P) said the country’s gross domestic product (GDP) would grow by 1.5 percent in the first semester, and improve to 2.5 percent to 3.5 percent in the second half.

For the whole year, the report said that GDP growth would slow down to 2.4 percent this year from 3.9 percent last year.

This is within the government’s full year target of 0.8 percent to 1.8 percent.

An indicator of economic performance, GDP is the value of the final goods and services produced in a country.

“The safest bet is to average the first and second quarter performance. We see GDP rising by 1.5 percent in the first half, either because the first quarter advanced GDP estimates would be revised upward, or if not, the heavy government spending will be translated into actual economic activity in the second quarter,” the report said.

The country’s GDP grew at a slower 0.4 percent in the first quarter mainly due to weak consumer spending and industry production.

“Ironically, the retail sector’s key players tell us that first quarter sales were up double-digit in volume terms. However, they have noticed a clear easing in April,” First Metro and UA&P said.

The report said that remittances, which mainly fuels domestic consumption, would sustain positive growth this year due to the continued deployment of Filipino workers abroad.

The depreciation of the peso, which is expected until the third quarter of the year, is needed to improve the purchasing power of remittance beneficiaries.

The report said the government’s decision to raise its budget deficit ceiling from P199.2 billion to P250 billion also contributed to the weakening of the peso, which had been trading within the P47 to P49 band most of mid-May to June.

The slowdown in remittances, which grew 2.2 percent in April from 3.1 percent in March, was not only due to weak inflows but also to the 0.5-percent depreciation of the peso, the report said.

The report also cited the rise in employment by 4.3 percent in April, which resulted in a lower jobless rate of 7.5 percent from 8 percent a year ago.

“We view the employment figures positively, considering the severity of the global recession, and so we don’t see a recession anywhere near,” the report said. –Maricel E. Burgonio, Manila Times